Maintaining records of communications is a fundamental compliance obligation, which has become increasingly challenging as the number of available messaging apps and other forms of electronic communications multiplies. J.P. Morgan Securities LLC and two affiliates ran afoul of those requirements when they failed to record thousands of electronic communications made by employees through unapproved channels. The misconduct was compounded by the fact that many communications involved senior employees who were responsible for ensuring that employees complied with the firm’s electronic communications policies, resulting in charges of failure to supervise. The firms’ parallel settlements with the SEC and CFTC resulted in $200 million in civil penalties and the imposition of a compliance consultant. In a break with longstanding practice in many SEC and CFTC resolutions – but consistent with the new policy announced by the SEC Division of Enforcement – the respondents have acknowledged that they violated the federal securities and commodities laws and regulations. This article reviews the applicable SEC and CFTC recordkeeping rules and details the alleged misconduct and terms of the settlements. See “Implications of Enforcement’s New Policy Requiring Admissions in Certain Settlements
” (Dec. 9, 2021).