Be aware of financial fraud in online trading and your financial firm’s policies on claims for reimbursement in fraud cases

Wall Street Journal: Check Brokerage Statements and Online Accounts for Signs of Fraud

Wall Street Journal: Check Brokerage Statements and Online Accounts for Signs of Fraud

A recent Wall Street Journal article suggests, “Most Firms Will Reimburse Customers, But There Isn’t a Blanket Guarantee.[i]” The problem remains that too often, the individual investor does not detect financial fraud and the financial firms may not detect and notify customers of problems. In order to protect your financial accounts and investments, it is important to learn how to properly read brokerage statements and online accounts. The WSJ article also highlights cybertheft risks inherent in any online financial activity, and how customers can minimize the chances they will become a fraud victim.

Cyberthieves can hack into your account and steal your money.

One such cyberthief, a Russian living in New York, received a 30-month sentence to prison for hacking into individual’s brokerage accounts and making trades without the knowledge of the account holders. The compromised accounts included Scottrade, E*Trade Financial, Fidelity Investments and Charles Schwab, to name a few. “He and his co-conspirators made trades in accounts to move the prices of holdings in accounts they had opened using stolen identities, causing about $1 million in losses, according to the Federal Bureau of Investigation.[ii]

The large and well-known financial firms offer safeguards to their customers in the event their accounts are compromised. Scottrade’s “Online Security Guarantee” offers some piece of mind to investors as well as tips and precautions so that customers maintain safe online habits.

Here are some precautions Scottrade suggests to minimize the risk of fraudulent activity in your account:

  • “Use safe online habits;
  • Install security software;
  • Create a safe and hard-to-guess password;
  • Keep your operating system and browser updated;
  • Review your financial history regularly;
  • Protect your account number and password.”

As for the guarantee and reimbursement offered by Scottrade, just to cite as an example of what is likely a similar standard for other competitive trading firms, the Online Security Guarantee (linked above), states, “You agree to cooperate with us in any investigation and to take additional steps and corrective measures to protect against fraudulent activity. We may ask you to give us access to your computer, sign an affidavit, assign certain rights to Scottrade or sign a release from us as a condition of reimbursement.” These conditions, albeit common, may give an individual investor some concern.

At Michael V. Favia & Associates, we can help individual and organizational investors going through the process of seeking reimbursement from financial firms after an incident of fraud or a compromised account. The events giving rise to theft could, in some cases, involve negligence among the investor, the financial firm, and others. The reimbursement process certainly does not need to adversarial, and sometimes being represented by counsel, we have found, can help move things along.

If you or a friend suspects financial fraud, please feel free to contact our firm for more information. Michael V. Favia & Associates represent clients with fraud cases. With offices conveniently located in the Chicago Loop, Northwest side and suburban meeting locations, you can schedule a meeting with an attorney at your convenience. For more about Michael V. Favia & Associates, please visit the firm’s website and feel free to “Like” the firm on Facebook and “Follow” the firm on Twitter.

[i] Wall Street Journal, Check Brokerage Statements and Online Accounts for Signs of Fraud. By Priya Anand, Jul. 25, 2014.

[ii] See WSJ article (FNi)


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