Risk
4/11/2011
01:06 PM
50%
50%

SEC Fines Former Executives For Client Privacy Breach

Private information on 16,000 customers was transferred to a departing manager's new employer in violation of government notification and opt-out regulations.

10 Massive Security Breaches
(click image for larger view)
Slideshow: 10 Massive Security Breaches
The Securities and Exchange Commission (SEC) announced Thursday that it's levied its first-ever fine against people solely for failing to properly protect customer data.

According to the SEC, the charges involve former employees of GunnAllen Financial, a broker-dealer that was winding down its operations last year, prior to being liquidated in November 2010. The SEC said that "former president Frederick O. Kraus and former national sales manager David C. Levine violated customer privacy rules by improperly transferring customer records to another firm."

The third person charged was chief compliance officer Mark A. Ellis, for failing "to ensure that the firm's policies and procedures were reasonably designed to safeguard confidential customer information," said the SEC. The agency also labeled GunnAllen's data privacy rules and regulations as "vague" and little more than a rewording of SEC regulations.

Kraus and Levine were ordered to pay penalties of $20,000 each, and Ellis $15,000. None confirmed or denied the SEC's findings.

"Brokerage customers should be able to trust that sufficient safeguards are in place to protect their private information from unauthorized access and misuse," said Eric I. Bustillo, director of the SEC's Miami regional office, in a statement. "Protecting confidential customer information is particularly important when a broker-dealer is winding down operations."

As far as SEC privacy fines go, this case is a first, in that it's the first one in which people were charged only with violating Regulation S-P, which is known as the Safeguard Rule. According to a blog post from attorney Michael Epshteyn, an associate at Hogan Lovells, Regulation S-P "requires broker-dealers, investment advisers, and other financial institutions under the SEC's jurisdiction to protect their customers' nonpublic personal information and to provide their customers the right to opt out of having their information shared with unaffiliated third parties."

According to the SEC, "Kraus authorized Levine to take information from more than 16,000 GunnAllen accounts to his new employer as the firm wound down operations in April 2010. Levine downloaded customer names and addresses, account numbers, and asset values to a portable thumb drive, and provided the records to his new employer after resigning from GunnAllen."

Customers didn't receive sufficient or advance notice that their data was being shared, said the SEC, and weren't given the required option to opt out.

Interestingly, GunnAllen had been previously involved in at least four breaches involving customer data -- three involving stolen laptops, and one case of a former employee accessing corporate email using stolen credentials. "Despite the security breaches, Ellis failed to revise or supplement GunnAllen's policies and procedures for safeguarding customer information," said the SEC.

Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
Register for Dark Reading Newsletters
White Papers
Video
Cartoon Contest
Current Issue
The Changing Face of Identity Management
Mobility and cloud services are altering the concept of user identity. Here are some ways to keep up.
Flash Poll
Slideshows
Twitter Feed
Dark Reading - Bug Report
Bug Report
Enterprise Vulnerabilities
From DHS/US-CERT's National Vulnerability Database
CVE-2013-7445
Published: 2015-10-15
The Direct Rendering Manager (DRM) subsystem in the Linux kernel through 4.x mishandles requests for Graphics Execution Manager (GEM) objects, which allows context-dependent attackers to cause a denial of service (memory consumption) via an application that processes graphics data, as demonstrated b...

CVE-2015-4948
Published: 2015-10-15
netstat in IBM AIX 5.3, 6.1, and 7.1 and VIOS 2.2.x, when a fibre channel adapter is used, allows local users to gain privileges via unspecified vectors.

CVE-2015-5660
Published: 2015-10-15
Cross-site request forgery (CSRF) vulnerability in eXtplorer before 2.1.8 allows remote attackers to hijack the authentication of arbitrary users for requests that execute PHP code.

CVE-2015-6003
Published: 2015-10-15
Directory traversal vulnerability in QNAP QTS before 4.1.4 build 0910 and 4.2.x before 4.2.0 RC2 build 0910, when AFP is enabled, allows remote attackers to read or write to arbitrary files by leveraging access to an OS X (1) user or (2) guest account.

CVE-2015-6333
Published: 2015-10-15
Cisco Application Policy Infrastructure Controller (APIC) 1.1j allows local users to gain privileges via vectors involving addition of an SSH key, aka Bug ID CSCuw46076.

Dark Reading Radio
Archived Dark Reading Radio

The cybersecurity profession struggles to retain women (figures range from 10 to 20 percent). It's particularly worrisome for an industry with a rapidly growing number of vacant positions.

So why does the shortage of women continue to be worse in security than in other IT sectors? How can men in infosec be better allies for women; and how can women be better allies for one another? What is the industry doing to fix the problem -- what's working, and what isn't?

Is this really a problem at all? Are the low numbers simply an indication that women do not want to be in cybersecurity, and is it possible that more women will never want to be in cybersecurity? How many women would we need to see in the industry to declare success?

Join Dark Reading senior editor Sara Peters and guests Angela Knox of Cloudmark, Barrett Sellers of Arbor Networks, Regina Wallace-Jones of Facebook, Steve Christey Coley of MITRE, and Chris Roosenraad of M3AAWG on Wednesday, July 13 at 1 p.m. Eastern Time to discuss all this and more.