A 17-year veteran advisor recently agreed to a lifetime ban for falsifying the signatures of a client on 10 documents transferring money out of the client’s accounts over a period of two months. Part of this transfer also involved 17 unauthorized trades in the client’s non-discretionary accounts. So how could a phone call have saved this advisor’s career?
It turns out that the advisor was the subject of a phishing scam. Apparently, the client’s email account had been hacked and the hacker emailed the advisor asking for funds to be transferred. This type of scam is commonly called phishing; the hacker is probing a potential victim to get information or money.
The advisor could have avoided this entire problem if he would have simply picked up the phone and called the client to confirm the instruction to transfer funds; FINRA’s records are not clear whether such an attempt was made.
Firms can avoid this headache a couple of way. First, firms should require all trades/redemptions to be requested via telephone, followed by proper documentation of that request. Second, firms should prohibit advisors from taking trade/redemption requests via email.
The hijacking of email accounts is one of the oldest and least sophisticated cyber-crimes out there. Yet, people continue to fall for the scam.
Protect yourself. Pick up the phone and call your client. You may save your career and get more business at the same time.