SEC charges firms for Deficiencies Relating to the Prevention of Customer Identity Theft
According to a press release issued by the Securities Exchange Commission on July 27, 2022, the regulator separately charged J.P. Morgan Securities LLC, UBS Financial Services Inc., and TradeStation Securities, Inc. for deficiencies in their programs to prevent customer identity theft, in violation of the SEC’s Identity Theft Red Flags Rule, or Regulation S-ID.
The SEC found that from January 2017 to October 2019, the firms’ identity theft prevention programs did not include reasonable policies and procedures to identify relevant red flags of identity theft in connection with customer accounts. The SEC’s orders find that the firms’ programs did not include reasonable policies and procedures to respond appropriately to identity theft red flags, or to ensure that the programs were updated periodically.
The SEC’s orders reportedly find that each firm violated Rule 201 of Regulation S-ID, with details as follows:
- The JPMorgan order also finds that the firm failed to exercise appropriate and effective oversight of all service provider arrangements and failed to train staff to effectively implement one of its identify theft prevention programs in 2017.
- The UBS order also finds that the firm failed to periodically review new or existing types of customer accounts to determine whether and how its identity theft prevention program should apply to them; failed to adequately involve the board of directors in the oversight, development, implementation, and administration of the program; and failed to train its employees to effectively implement the program.
- The TradeStation order also finds that the firm failed to adequately involve its board of directors in the oversight, development, implementation, and administration of its identity theft prevention program and failed to exercise appropriate and effective oversight of service provider arrangements, according to the SEC.
Each firm agreed to cease and desist from future violations without admitting or denying the charges, and agreed to be censured, and to pay the following penalties: JPMorgan: $1.2 million, UBS: $925,000, and TradeStation: $425,000.
According to a spokesperson from the SEC, the purpose of Regulation S-ID is to help “protect investors from the risks of identity theft.”
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Tags: Identity Theft Red Flag rules, Regulation S-ID, SEC sanctions JP Morgan, securities fraud attorneys, Tradestation fined, UBS Financial Censure Last modified: July 28, 2022