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Old 04-05-2015, 08:25 AM   #21
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How would that many transfers happen in short order without the brokerage being aware? They do monitor for unusual activity. If all their assets were stolen I'd guess that would seem unusual.
There is always a false sense of security, and it has roots in our need to feel safe. That helps many of us act properly, rather than being afraid of participating.

But the pendulum always swings too far, doesn't it? Their is no single definition of security with regard to financial institutions. Oh, they have various seals that attest to just how secure they are now, but things change. The attacks evolve every minute of each day. Reminds me of a biological virus...

The protection is just devices, programming and people. Most devices just sit there and perform. The programming in the device and systems that are watching is flawed, and needs patches, updates, fixes, etc. People apply the fixes as best they can, but people are not infallible.

What if an external entity plants new code in the devices that makes it seem that transactions are normal, and nothing to worry about?

If the NSA can/has planted firmware code in hard drives, it seems to me that one attack vector in the future will be the compromise of devices that can have a catastrophic and lasting effect on the economy.

This article describes many compromises that have taken place in this century. It's filled with jargon and tech-speak, but it is not science fiction.

Your hard drives were RIDDLED with NSA SPYWARE for YEARS • The Register
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Old 04-05-2015, 08:55 AM   #22
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They can only restore the 1's and 0's that represent the funds in your account back if they have the money to back it up. They can't create it out of thin air. Otherwise it would be illegal.

Only the Federal Reserve has the power to create money out of thin air and there actually is an accounting record of when it is done FWIW.

I share OP's concern that for anyone with significant assets (ie average retirement accounts of ER board members) that this should be a larger concern than the "Identity Theft" hype that we see in the media that is getting everyone all riled up.

I would like to have a better personal understanding of the law (if any, Fed or state) that protect the holders of these types of accounts due to theft (internal or external) and the conditions under which the holder is protected or not.
- basic mutual funds
- brokerage accounts
- IRA wrappers
- 401k wrappers

I would also be interested in knowing how this would apply to paper securities -- ie those not held in "street name".

-gauss
You're trusting the funds will honor their gaurentees(the ones that give them). Or that fund XYZ doesn't want it's name on the front page of the WSJ saying it lost 100,000 Americans retirement(bad for business).

Of course any time I've seen a loss, the brokerage, transfer agent, or insurance company provided the funds to make the account holder whole. So yes, the monies were put back. The moneys not manufactured it came from a legit source.

Then the brokerage and fund company goes after and finds the real assets. These companies have dealt with fraud recapture since day one of being in business. Fraud is not limited to the internet age, it happened long before. The brokerage and fund companies freely share information about fradulant schemes. They all have safeguards in place to avoid fraud up front. I spent many years watching the industry mature in this aspect. I sleep very well at night knowing the safeguards that are in place.

Like mentioned earlier it's one thing to spear fish a techie to gain access to a test, big data implementation. I've never known a techie that had a user profile on a system of record for the application. If they did they would be terminated. You don't need an system of record id to do a techies job.

I guess the only way you could be sure is keep your assets in an FDIC account, or under a mattress. I prefer to put my money in places that gaurentee no loss from fraud. Running systems out of redundant tier 4 data centers, with well trained staff that monitor possible fraud scenarios. Strict state of art audits; scheduled fradulant activities thrown in to test the monitoring and the employees reactions. But I'm a little polyanna.
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Old 04-05-2015, 09:31 AM   #23
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SIPC would cover the loss of shares (up to a certain amount - I think it's $500k). It doesn't cover collapse in value of those shares - but I believe it covers loss of the shares (taken/stolen from your account).

Most of the brokerages have a self-insurance coop - so as long as the attack is limited to one or two brokerages, the other brokerages would backstop. Schwab, IIRC, is not part of the coop - it has a Lloyds of London policy for the coverage.
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Old 04-05-2015, 09:47 AM   #24
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Fidelity has some guarantees for backing up customers in the event of unauthorized account access - above and beyond the SIPC protection. https://www.fidelity.com/security/cu...tion-guarantee

I haven't been too concerned about someone hacking into my account. We have quite a few safeguards in place. I figure Fidelity has to deal with attempts to steal funds all the time.

Fidelity is a multi-generational family-owned* and run private company founded in 1946. These kinds of companies usually take a much longer term view and aren't under the quarter-to-quarter performance scrutiny of a public company. It comes down to culture. So far Fidelity has shown the inclination to have good systems in place which indicates a willingness to invest in infrastructure. I've never noticed them to be sloppy. https://www.fidelity.com/security/ho...keeps-you-safe

*Fidelity Investments is currently run by Abigail Johnson (3rd generation) who is the 7th richest woman in the world on the Forbes list. Her father, Ned Johnson, still holds the CEO position.
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Old 04-05-2015, 10:18 AM   #25
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I have become a bit more complacent. I remember when I first opened up my brokerage account, being the true luddite, I would literally print every transaction and amounts so they couldn't screw me out of my money if it just disappeared.
Now, I just print the yearly statement. Though I do have a chromebook that its sole use is for financial transactions involving my bank, brokerage, TD, and HSA.


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Old 04-05-2015, 10:39 AM   #26
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We have a zillion email alerts generated by our various banking and brokerage accounts when any transaction occurs. If there is any change in account profile, there is two step verification before it can complete, and we still get ample notification (even by mail in some cases).

I'm still checking things about twice a week in most accounts - mainly because that's how often I update Quicken or need to do bill pay or a transfer or whatever.

All statements are reviewed and reconciled monthly.

I think the only thing we ever print is the annual tax return.
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Old 04-05-2015, 10:48 AM   #27
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Some examples ?



I would think such things could occur when banks are carelessly or illegally doing business with international criminal enterprises, which they should not be doing anyway.

I take it you dont pay attention to current events. Google "billion dollar bank heist" and you will find no shortage of articles.


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Old 04-05-2015, 11:03 AM   #28
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Was This Billion-Dollar Bank Heist Preventable? - Forbes

(not a completely naked link. This story has been referred to in previous posts.)
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Old 04-05-2015, 11:05 AM   #29
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Sorry dallas, but a "billion dollar bank heist" is small change. Canada's largest bank's last annual profit was > $2 billion. I don't have numbers for US banks but suspect they make much more.

The loss of 6 months' worth of profits would hit share owners a bit but would no bring our economy to its knees.
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Old 04-05-2015, 12:03 PM   #30
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I worry that an unholy union of ebola and bird flu will produce the ultimate computer virus that encrypts all the brokerage records everywhere unless everyone pays a ransom in bitcoins to an undisclosed account, which if unpaid within 72 hours will cause all my AAPL stock to be dumped out of ATM machines around the world in a cataclysmic apocalypse culminating with fire and brimstone coming down from the skies, rivers and seas boiling, forty years of darkness, earthquakes, volcanoes... The dead rising from the grave! Human sacrifice, dogs and cats living together... mass hysteria!

But that's just me.
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Old 04-05-2015, 01:16 PM   #31
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I worry that an unholy union of ebola and bird flu will produce the ultimate computer virus that encrypts all the brokerage records everywhere unless everyone pays a ransom in bitcoins to an undisclosed account, which if unpaid within 72 hours will cause all my AAPL stock to be dumped out of ATM machines around the world in a cataclysmic apocalypse culminating with fire and brimstone coming down from the skies, rivers and seas boiling, forty years of darkness, earthquakes, volcanoes... The dead rising from the grave! Human sacrifice, dogs and cats living together... mass hysteria!

But that's just me.
Just let me know ahead of this when to sell my Apple stock. Man, I don't know if I could handle dogs and cats living together, though.
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Old 04-05-2015, 03:24 PM   #32
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I worry that an unholy union of ebola and bird flu will produce the ultimate computer virus that encrypts all the brokerage records everywhere unless everyone pays a ransom in bitcoins to an undisclosed account, which if unpaid within 72 hours will cause all my AAPL stock to be dumped out of ATM machines around the world in a cataclysmic apocalypse culminating with fire and brimstone coming down from the skies, rivers and seas boiling, forty years of darkness, earthquakes, volcanoes... The dead rising from the grave! Human sacrifice, dogs and cats living together... mass hysteria!

But that's just me.
I don't find this stuff to be worth worrying about personally, but is it really necessary to ridicule people who bring up legitimate concerns about low probability, but very high severity outcomes?
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Old 04-05-2015, 03:38 PM   #33
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The greater risks most of us face continue to be excessive fees to financial intermediaries, and theft, not from hackers, but abusive family member.
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Old 04-05-2015, 04:05 PM   #34
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People perhaps don't realize how vulnerable they are to phishing. There can be some very clever attempts.

Unfortunately organizations are being successfully targeted by these techniques. Then a lot of people can be impacted.
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Old 04-05-2015, 04:55 PM   #35
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The market today has any entirely different infrastructure than ten years ago. HFT, algo trading. And now dark pools (ecn's) are removing transparency from the markets while providing anonymity. I think we know very little about how this new world of finance is going to work out.


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Old 04-05-2015, 10:11 PM   #36
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Im talking about a breach that causes the company to fold, not just a few million here and there each mont
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Wow, seems many of you guys believe theft is impossible. Scary.
No, merely that the type of breach you are talking about is extremely unlikely, completely beyond our ability to do anything about, and IMO just not worth worrying about. Any more than I spend time worrying about the meteor.

Anyway, assuming it's not only possible, but likely, what is the alternative? Keep your money under the mattress? I guess you could split your assets up amongst every brokerage there is in the theory that the hackers would only get one of them. Is that what you have done?
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Old 04-05-2015, 10:27 PM   #37
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I realize that there WILL be continued data breaches with various companies, and that there will at some point be a publicized incident with a large broker.

But for those that are truly staying up awake at night actively worrying about this, are you worried about other, far more likely scenarios...like, someone stealing mail from your mailbox that has your personal information on it, ranging from name, address, or even SSN? Or how about someone at your current (or former) place of work, where your SSN is in the payroll database, being hacked?

I'd like to think that companies like eTrade, Ameritrade, et. al realize that just one breach means that they lose tens of thousands of accounts (if not more), and they have to be ever-vigilant on security. Outside of that, what else are you going to do? What else can one do apart from using a dedicated password(s) for financial accounts, checking to make sure that their broker has somewhat decent security and safeguards (like making sure a bank account linked to your account has the same name, or notifying you via e-mail that a new bank account has been added to your account, etc.)? I'm willing to bet that a majority of the losses that occur to financial accounts are due to errors committed by the individual from phishing and downloading viruses. So do you have the latest virus and other security software to help reduce the chance of you getting virsuses and clicking on phishing links?
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Old 04-05-2015, 10:35 PM   #38
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I'm willing to bet that a majority of the losses that occur to financial accounts are due to errors committed by the individual from phishing and downloading viruses.
I don't disagree with your sentiment, but I think you are wrong about the majority of losses. I've been out of the biz now for a decade, but I'm pretty sure the majority of losses are still from corporate servers being hacked and personal information being stolen. Think about it...it would take a lot of viruses and phishing attacks to match a single 80 million account hack from Anthem or Target. Heck, in the old days people left laptops on the subways with huge amounts of other people's personal information on them. I suspect that still happens a lot more often than we hear about.
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Old 04-06-2015, 02:39 AM   #39
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I personally think it is more likely than not, that sometime in the next decade, somebody will figure out how to rob a bank/brokerage for hundreds and millions and get away with it.

I imagine getting money back from most of the failed states in the Middle East would be really really hard now days.

Schwab has a $600 million dollar policy with Lloyds of London to handle the event that the SPIC limits are exceeded. The liability is limited to $150,000,000 in securities and $1,150,000, it has been difficult but so far I've managed to keep my balances below that number.
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Old 04-06-2015, 09:32 AM   #40
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Anyway, assuming it's not only possible, but likely, what is the alternative? Keep your money under the mattress? I guess you could split your assets up amongst every brokerage there is in the theory that the hackers would only get one of them. Is that what you have done?
#1) Keeping your assets spread out over multiple institutions (not so easy with 401ks, but for IRAs and brokerages it is possible)

#2) Holding the paper version of the asset as opposed to holding in street name (assuming you can find a way to get these). If memory serves lost or stolen paper assets could be replaced for the price of a surety bond that would cost on the order of 2%.

-gauss
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