The Financial Industry Regulatory Authority (FINRA) is noticing an increase in complaints about online and computer-related security breaches at broker-dealer firms.
FINRA has received dozens of complaints from customers alleging that their information has been compromised. This information could be used to access online accounts, move money and make transactions.
What FINRA has noticed is that these cases begin when a brokerage firm receives a fraudulent request from an individual that appears to be a client. Because they do not detect that the request is fraudulent, they transfer customer funds in response to that request.
Typically, these breaches involve an individual who is somehow able to hack into private email accounts of FINRA members' customers. In a form of identity theft, the hackers access a customer email account and request that the brokerage firm move over large amounts of money or securities into an account that the client has no history of using. FINRA is taking action and sending letters out to brokerage firms, warning them of this recent increase in fraudulent requests.
The FINRA Executive Vice President for Member Regulation, Daniel Sibears, gave two possible explanations for why brokerage firms are wiring money to hackers. First, customer validation procedures at these firms may not be adequate. There is a possibility that, with stricter identity validation procedures, the fraudulent transfers could be avoided. Second, broker firm employees may be in a hurry to help the client and consequently miss the warning signs of fraud.
While cybersecurity is at the forefront of FINRA's attention, until recently the U.S. Securities and Exchange Commission (SEC) has not viewed this issue as a high priority. Speaking alongside Mr. Sibears at a June 17th event hosted by the Insured Retirement Institute in Washington, Willie Davis of the SEC said that while cybersecurity has not been an area of emphasis in the past, it will likely be a large focus in the upcoming year.
Cybersecurity breaches are highly detrimental to investors. If your brokerage firm transferred your money because of a fraudulent request, contact the securities fraud lawyers at Meyer Wilson today.