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The UK regulator Ofgem said on Wednesday it had fined Morgan Stanley & Co. International plc (MSIP) for failure to record and retain electronic trading communications in energy trades after wholesale energy traders were found to have used WhatsApp on privately owned phones to discuss energy market transactions.
The failure to comply with the requirement to record and retain electronic trading communications was for the period between January 2018 and March 2020.
Ofgem has levied a fine of $6.8 million (£5.41 million) on Morgan Stanley for the use of WhatsApp on privately owned phones in the first-ever fine issued in the UK under legal requirements to record and retain electronic communications relating to trading wholesale energy products.
The rules have been designed to protect consumers and ensure market transparency and integrity by providing Ofgem the powers to investigate and sanction against market manipulation and insider trading, the UK regulator said in a statement.
The breach emerged following Morgan Stanley’s responses to information requests made using the information collection powers Ofgem has under these regulations.
Morgan Stanley has admitted the breaches between January 2018 and March 2020, and “has taken steps to ensure the breaches do not happen again, including enhanced staff training and the strengthening of its internal systems and controls,” Ofgem said.
The bank has fully co-operated with Ofgem’s investigation and has agreed to settle the case. The fine includes a 30% penalty discount for settling.
“This fine sends a strong message to market participants that they must comply with all REMIT rules or face enforcement action,” said Cathryn Scott, Regulatory Director of Enforcement and Emerging Issues at Ofgem.
“It is unacceptable that MSIP failed to prevent electronic communications which could not be recorded or retained. It risks a significant compromise of the integrity and transparency of wholesale energy markets.”
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com