The Financial Industry Regulatory Authority (“FINRA”) has received an increasing number of complaints from investors whose funds have been stolen by fraudsters. Hackers access investors’ email accounts and later send email instructions to the brokerage firms, seeking to transfer money from brokerage accounts.
FINRA’s Alert warns investors about the potential financial consequences of a compromised email account, and provides tips for safeguarding assets. Simultaneously, FINRA issued a Regulatory Notice advising Members of the risks associated with accepting instructions to transmit or withdraw funds via email. According to FINRA, brokerage firms should reassess their policies and procedures to ensure they are adequate to protect customer assets from these risks. FINRA stated, “Investors who suspect that their email account has been hacked should immediately notify their brokerage firm and other financial institutions, and anyone who suspects they have been defrauded should file a complaint with FINRA.”
This law firm was recently consulted by a client whose account was hacked. When the client complained to the brokerage firm, the firm refused to reimburse the client, blaming the client for the hack attack. The client’s only recourse was initiating a FINRA arbitration.