Ofgem has fined US banking giant Morgan Stanley more than £5.4 million after its energy traders communicated via private WhatsApp discussions.

The regulator said the company had failed to take “reasonable steps” to ensure its staff did not use ways of communicating that it could not hand over to investigators should they ask for the information.

Traders who were buying and selling energy used their private WhatsApp accounts to discuss transactions between January 2018 and March 2020, Ofgem said.

It meant that Morgan Stanley was unable to supply these conversations to the regulator when asked to do so.

It is the first fine handed out in Great Britain under the regulation on wholesale energy market integrity and transparency (Remit) rules, Ofgem said. This was an EU regulation which was transferred to UK law after Brexit.

Ofgem found that, while Morgan Stanley International plc (MSIP) had policies in place which banned traders from using WhatsApp, it “did not take sufficient reasonable steps to ensure compliance with its own policies and the requirements of the regulations”.

The watchdog said it would have fined the company £7.7 million, but it discounted the figure by 30% after Morgan Stanley chose to co-operate and settle the matter.

Ofgem has been investigating Morgan Stanley’s compliance with the rules since 2021, it said.

Cathryn Scott, regulatory director of enforcement and emerging issues, said: “This fine sends a strong message to market participants that they must comply with all Remit rules or face enforcement action.

“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.

“We welcome the steps MSIP has taken to ensure the breaches do not happen again.”

Morgan Stanley declined to comment.