Morgan Stanley is going to financially penalize employees who used messaging platforms like Whatsapp for company-communication affairs. Some employees are charged with fines to the tune of several thousand dollars, while a select few will have to pay a whopping $1 million. Based on the number of messages sent using unauthorized platforms, the seniority of the employee who breached the rule, and whether the employee got any warning earlier, the financial services company has come up with the quantum of fine.
This development has its roots connected to the investigation by the SEC that revealed the fact that employees of at least 16 financial services companies – which includes Morgan Stanley – habitually used Whatsapp to communicate with clients and colleagues. The problem is, this off-channel communication resulted in negligence in record-keeping. These 16 financial firms admitted that they failed to preserve the communication logs as a substantial portion of the communication took place on such off-channel platforms.
It’s important to note that the lapses happened not just on the part of lower-rung employees, but senior managers as well. All of these firms violated the provision of record-keeping as prescribed by the SEC.
Firms like Morgan Stanley, Goldman Sachs, and CitiGroup Global Markets had to shell out $125 million each to the SEC. Some firms, including Morgan Stanley, also had to pay $75 million each to the Commodity Futures Trading Commission.
The decision taken by Morgan Stanley to impose a fine on its employees comes in the wake of the SEC intensifying its crackdown on unauthorized communication channels. It became important for the firm to take proactive measures to avoid getting hit by further penalties. It is important to note that the firm had already warned its employees against using unauthorized communication channels.
The decision elicited mixed reactions from industry experts. Some like Oliver Blower of Voxsmart termed it as “ridiculous” while Paul J. Davies of Bloomberg said that the “Price is right”. Among the balanced voices, Alex Viall of Global Relay thinks that penalizing employees won’t solve the problem of using unauthorized channels.
The Way Forward
Along with the fines, firms like Morgan Stanley have been ordered to cease and desist from repeating such deviations. All of the 16 firms had been ordered to take the help of compliance consultants to make sure that the record-keeping norms are followed diligently.
It will be interesting to see how the employees who have been fined react.
While it is irresponsible on the part of employees to use Whatsapp and other unauthorized messaging platforms, it’s the responsibility of Morgan Stanley to ensure that adequate technological systems are in place that can offer the same communication experience that these messaging platforms offer. It should also be focused that a major part of the period when the usage of unauthorized channels took place happened during the pandemic. People across the industry were not prepared for the unprecedented 100% remote communication with no access to office infrastructure.