Ofgem Imposes £5.4 Million Fine on Morgan Stanley for WhatsApp Breaches
The UK energy market regulator has fined Morgan Stanley £5.4 million after energy traders discussed business in WhatsApp exchanges on private phones.
Ofgem said that Morgan Stanley failed to take “reasonable steps” to record and retain electronic communications between its wholesale energy traders.
The company traders discussed energy market transactions between January 2018 and March 2020, in breach of Morgan Stanley’s own policies and the requirements of the regulations.
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The £5.4 million fine has been issued for the first time ever in Britain under rules that fall under the REMIT Enforcement Regulations.
Inherited from the European Union, following Britain’s departure from the bloc in 2020, REMIT was retained under national UK legislation.
One of the requirements under UK law is that market participants record and retain electronic communications about trading wholesale energy products. Companies must prevent such interactions by using a format that cannot be recorded, which in this case were WhatsApp messages.
“This fine sends a strong message to market participants that they must comply with all REMIT rules or face enforcement action,” said Ofgem regulatory director Cathryn Scott.
The company admitted its mistake and took measures to prevent future breaches, reported Ofgem.
The regulator welcomed the steps taken by the company, which included enhanced training of its staff and tightening its grip on internal systems.
Morgan Stanley cooperated with Ofgem’s investigation and has agreed to settle. This led to Ofgem discounting the initial penalty of £7.7 million by 30 percent, down to £5.4 million.
This is not the first investigation into Morgan Stanley’s record-keeping practices. In 2022, the company paid $200 million to U.S. regulators after its employees were found to use WhatsApp and other platforms to discuss business in breach of federal record-keeping laws.
Ms. Scott said that Morgan Stanley’s breach risked “a significant compromise of the integrity and transparency of wholesale energy markets.”
REMIT regulations prohibit market abuse, including market manipulation or insider trading.
Insider trading is the practice of buying and selling stocks, bonds, or other securities based on information that the general public doesn’t have access to. Insider trading is illegal in the UK because of the unfair advantage it gives to operators with access to information.
Fair trading practices help consumers and other market participants stay confident that wholesale energy prices are open and competitive.
Wider Concerns
The End Fuel Poverty Coalition has welcomed Ofgem’s actions but expressed wider concerns about the role of energy market trading.
“Every act of trading energy on the markets usually results in profit for the traders and ultimately adds to our bills. Units of energy can be traded several times before reaching our energy suppliers,” the coalition spokesperson said.
The latest Ofgem data has revealed that every unit of gas is churned on the markets 13 times and every unit of electricity is traded three times.
The churn rate is calculated by dividing the total volumes traded by the total amount of energy delivered. It shows how often a unit of energy is traded before it is delivered to consumers.
The End Fuel Poverty Coalition has called for “as much transparency as possible” when it comes to energy market companies in Britain.
UK households have been faced with soaring energy bills in the past year. While energy prices showed a slight slowdown in the latest consumer price inflation data, this doesn’t translate into a substantial cost relief for a regular consumer.
“The energy bills crisis is still very much a reality for households across the country,” said the coalition.
Since 2013, Ofgem has dealt with 795 alerts, reviewed 197 cases, and opened more than 19 investigations to identify and address poor conduct in the wholesale market.
The Epoch Times has contacted Morgan Stanley for comment.
