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Brokerage and investment account fraud
Posted on Feb 24, 2008 by Tom Fragala
In the midst of so much noise about identity theft, credit reports, freezes and alerts here is some important advice. Don't forget to protect your brokerage, investment and retirement accounts; financial accounts like those you open with a stockbroker or financial adviser. Those accounts can be withdrawn from like a checking account, either with a check, wire transfer or electronic funds transfer. And don't forget to protect even "dormant" accounts, perhaps a trust fund or retirement account you never touch. Nearly all are vulnerable to being compromised and drained, especially if the account has check writing privileges.
To make matters worse, your protections against loss are very limited. There is no over-arching consumer protection law for fraud loss on brokerage or investment accounts. Basically, your account agreement (and case law) governs what happens in the case of fraud.
There is an organization called the Securities Investor Protection Corporation (SIPC), but much like the FDIC for checking and savings accounts, the SIPC only restores your funds in the event that a brokerage firm fails. Read more about protecting yourself from fraud on the SIPC web site.
If you do fall victim to fraud, immediately report the incident to the bank or firm by telephone. I also recommend that you follow up in writing to be sure (sent certified mail). You can also notify the Securities and Exchange Commission and the National Association of Securities Dealers if your account is governed by those groups.
To detect fraud and stop losses, your best protection is to read every account statement in a timely manner and report fraud quickly. To prevent fraud, see if you can put a password or PIN on each of your investment accounts. I don't mean for online access, but a password or PIN that is needed whenever anyone calls or tries to make changes to your account.
This is all an added inconvenience, no question. Security is always a compromise, there is no way around that.
Filed under: Identity Theft, Tips
Comments
Bob Mulholland on Mar 14, 2008
One of my brokers, Interactive Brokers, has something called the Secure Transaction Program. It's a small hardware device, which looks like a calculator. When you login through the SSL login it outputs a set of numbers which you have to put into the device to get another set of numbers, which you put into the login page. The device also has a PIN. You need it to login to the trading platform and also to do any financial transactions.
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