Customer Information Protection
Protection of financial and personal customer information is a key responsibility and obligation of FINRA member firms. Under the SEC’s Regulation S-P, firms are required to have policies and procedures addressing the protection of customer information and records. This includes protecting against any anticipated threats or hazards to the security or integrity of customer records and information and against unauthorized access to or use of customer records or information. The rule also requires firms to provide initial and annual privacy notices to customers describing information sharing policies and informing customers of their rights.
Additionally, Regulation S-ID requires member firms that offer or maintain covered accounts to develop and implement written identity theft prevention programs.
Firms should be aware that customer information and records can be compromised in a variety of ways. This is especially true for firms that offer online, Web-based access to trading platforms and customer account information. Firms must understand and address the potential risks of brokerage account intrusions, whereby an unauthorized person gains access to a customer account and either steals available assets or misuses the account to manipulate the market.
Intrusions are generally accomplished through the theft of the login credentials of a customer or firm employee. Accounts have also been breached through fake electronic instructions (e.g., email requests for funds transmittals). Since this type of illicit activity can raise both investor protection and market integrity concerns, it is essential that firms use reasonable measures to protect customer information and assets. FINRA Rule 3110 specifically requires firms to adopt procedures concerning transmittals of customer funds that include a means of customer confirmation.
If a Customer's Account or Data is Compromised
- Contact your FINRA Coordinator and the SEC immediately.
- Review this Checklist to determine next steps.
- You may need to contact state and other relevant regulatory authorities. State laws may require specific reporting procedures
- Consider whether or not the incident should be reported to FinCEN as a suspicious activity.
FINRA's Office of General Counsel (OGC) staff provides broker-dealers, attorneys, registered representatives, investors and other interested parties with interpretative guidance relating to FINRA’s rules. Please see Interpreting the Rules for more information.
OGC staff contact:
1735 K Street, NW
Washington, DC 20006
- Distributed Denial of Service (DDoS) Attacks on Member Firms
- SEC Approves New Supervision Rules
- SEC Requests Broker-Dealers Make SARs and SAR Information Available to FINRA
- Verification of Emailed Instructions to Transmit or Withdraw Assets From Customer Accounts
- Verification of Instructions to Transmit or Withdraw Assets from Customer Accounts
- FINRA Clarifies Guidance Relating to SEC Regulation S-P under Notice to Members 07-06 (Special Considerations When Supervising Recommendations of Newly Associated Registered Representatives to Replace Mutual Funds and Variable Products)
- SEC Approves Rule 2342 Setting Forth Requirements for Providing SIPC Information to Customers
- NASD Reminds Members of Their Obligations Relating to the Protection of Customer Information
- Members' Responsibilities When Outsourcing Activities to Third-Party Service Providers
- Treasury Issues Final Suspicious Activity Reporting Rule for Broker/Dealers
- Targeted Examination LetterFINRA is conducting an assessment of firms’ approaches to managing cyber-security threats. FINRA is conducting this assessment in light of the critical role information technology (IT) plays in the securities industry, the increasing threat to firms’ IT systems from a variety of sources, and the potential harm to investors, firms, and the financial system as a whole that these threats pose.January 01, 2014
- Guidance, Compliance ToolsWhat should a firm do after it discovers that a customer’s account has been compromised?
- GuidanceThe Red Flags Rule requires that each "financial institution" or "creditor" --which include most member firms--implement a written program to detect, prevent and mitigate identity theft in connection with the opening or maintenance of "covered accounts."
- Guidance, Key TopicFINRA has created this page to educate member firms on “Firm Identity Theft”.
- FINRA Fines E*Trade Securities LLC $900,000 for Supervisory Violations Related to Best Execution and Protection of Customer Order InformationJune 02, 2016
- FINRA Fines Morgan Stanley Smith Barney and Scottrade a Total of $950,000 for Failing to Supervise the Transmittal of Customer Funds to Third-Party AccountsJune 22, 2015
- FINRA Issues New Investor Alert, Cold Calls From Brokerage Firm Imposters—Beware of Old-Fashioned PhishingAugust 06, 2013
- January 26, 2012
- October 05, 2009
- Investor AlertYour brokerage firm has an obligation to safeguard your personal financial information. And every investor should take time to understand their firm’s cybersecurity procedures. But even the best procedures cannot prevent all instances of identity theft—especially if the vulnerability lies with you, the customer. Here are critical steps you can take to safeguard your financial accounts and help prevent identity theft.
- Investor AlertInformation technology (IT) plays a critical role in the securities industry. Unfortunately, cyber threats to the information and computer systems of brokerage firms are increasing, and with these threats comes the risk of potential harm to investors.
- Investor AlertRecently, FINRA has received reports that scamsters are posing as employees of at least one well-known brokerage firm to obtain personal information. In a new twist to Internet "phishing schemes," which use spam email to lure you into revealing everything from Social Security numbers to financial account information, it appears that some fraudsters may be resorting to a time-tested method—the telephone call.
- Investor AlertFINRA is updating this Alert to tell you about some of the latest online identify theft scams targeting financial sector customers and to provide tips for spotting and avoiding these scams.
- Investor AlertFINRA has received an increasing number of reports involving investor funds being stolen by fraudsters who first gain access to the investor’s email account and then email instructions to the firm to transfer money out of the brokerage account. In addition to issuing a Regulatory Notice to firms, we are issuing this Alert to warn investors about the potential financial consequences of a compromised email account and to provide tips for safeguarding your assets.
- Investor AlertFINRA is issuing this Alert to warn the public about a recent auction rate securities (ARS) “phishing” scam that promises compensation from ARS settlements in exchange for personal information. The email looks like it originated from FINRA—although it did not.
- Investor AlertThe Internet and, more recently, wireless technology have made it easy for investors to check brokerage account information and initiate investment transactions on the go. We are issuing this Alert to warn investors to take precautions to help ensure the security of their brokerage accounts. Not doing so puts your account information and investments at risk.