Firms Must Verify Funds Transfer Instructions
FINRA has issued a Regulatory Notice advising firms to reassess their policies and procedures for accepting instructions via e-mail in light of recent hacking cases. Various law enforcement authorities have warned the industry that third party hackers have gained unauthorized access to e-mail accounts and then sent funds transfer instructions to broker-dealers, many of whom followed the instructions without verification. FINRA warns firms that policies and procedures should (a) include some sort of verification to ensure that transfer instructions actually came from the customer and (b) identify red flags such as requests that are out of the ordinary, instruct transfers to an unfamiliar third party, or indicate urgency. FINRA notes that both introducing and clearing firms should have the necessary policies and procedures.
OUR TAKE: Both advisers and broker-dealers should consider verification. The key will be to educate clients that live contact will be required before moving funds.