New York Securities Fraud Lawyers Blog
Can’t imagine having a retirement brokerage account drained in a case of preventable identity theft? Such an unimaginable misfortune is a devastating reality for an investor alleging in a FINRA arbitration complaint that he had the entirety of his account at Invesco stolen, without any help or recompense from the brokerage firm. An unidentified perpetrator used this unsuspecting investor’s private identifying information to access and steal money from a 401k retirement account. Malecki Law securities fraud attorneys recently filed a claim against Invesco Distributors Inc, on behalf of this investor alleging their failure to safeguard their client’s assets pursuant to FINRA Rules, SEC Regulations, and securities laws.
This foreseeable fraud initiated when, just around the busy Christmas holiday season, an unidentified individual accessed our client’s Invesco retirement 401k. The perpetrator changed the email address and phone number, which had previously been on file for ten years. Within days, the perpetrator stole funds totaling over $100,000 from the investor’s Invesco 401k brokerage account. The perpetrator also successfully took a loan against the 401k account and transferred money to a bank account not owned by our client. Furthermore, Invesco transferred $25,000 to the IRS as a penalty for borrowing against the 401(k) accounts. Amazingly, the investor learned of these unauthorized account transactions only from checking Invesco’s account portal.
Invesco Distributors, Inc. is an indirect wholly owned subsidiary of Invesco Ltd, according to their official website. Invesco Ltd. announced in a recent press release that their firm manages an estimated $972.8 billion in client assets. Based in Texas, Invesco Distributors Inc., is their U.S distributor of mutual funds, exchange-traded funds, institutional money market funds and other retail products. As a FINRA registered broker-dealer, Invesco Distributors Inc. is expected to comply with required industry practices, statutes, rules, and regulations. FINRA rules, SEC regulations and securities laws exist to encourage brokerage firms to protect their investor’s information.
Malecki Law attorneys allege that Invesco failed to adhere to FINRA rules, SEC regulations and securities laws created to protect investor accounts from unauthorized access. The SEC enforces two fundamental statutory laws, SEC Regulation S-P (17 CFR Part 248 – Subpart A) and SEC Regulation S-ID (17 CFR Part 248 – Subpart C) which encourage brokerage firms to protect against identity theft and subsequent account breaches adequately. Brokerage firms have a responsibility to enforce safeguards to protect their customer from account breaches and unauthorized transactions from identity theft. As part of their supervisory rules, FINRA requires that members understand their obligations under Regulation S-P and related SEC rules and interpretations.
The SEC’s regulations S-ID requires that firms must “implement a written program to detect, prevent and mitigate identity theft in connection with the opening or maintenance of “covered accounts.” As a FINRA member, Invesco retirement brokerage accounts are subject to these laws, rules, and regulations as well. Based on their alleged actions, Invesco appears to have inexcusably failed to implement such a program with the protective features. The SEC even provided a sample guide for firms to use in drafting their identity theft protection program. Firms registered under The Securities Exchange Act of 1934 “must be able to identify, detect and respond to “red flags” that could prevent identity theft”. (17 CFR 248.201 (a)(1)).
Instead, Malecki Law alleges Invesco missed many “red flags” that would have indicated suspicious activity in their customer’s 401k retirement account. The identity fraud perpetrator made changes to the customer’s longstanding email and phone number. Retirement savings, including our client’s Invesco 401k account, were buy and hold accounts, that very rarely have sudden transactions. In buy and hold accounts, an investor holds on to purchased securities for the long term in expectation of receiving a higher return. Sudden withdrawals from an account after recently modified consumer information unquestionably should raise “red flags” for potentially fraudulent transactions.
Regulation S-P requires that Invesco and other financial institutions registered with SEC must “adopt written policies and procedures that address administrative, technical, and physical safeguards for the protection of customer records and information.” Invesco needed to enforce just a few safeguards to save this investor from losing hundreds of dollars in their hard-earned retirement savings. (17 CFR 248.30). FINRA even issued Regulatory Notice 14-10 stating that “a firm’s policies and procedures for changes of customer account information must include a method of customer confirmation, notification or follow-up”. Therefore, Malecki Law alleges that Invesco should have performed their due diligence in verifying and authenticating the updated account information. At the very least, the customer should have received immediate notification of the sudden recent account activity.
Furthermore, as alleged, Invesco appears to have failed to mitigate the damage in an appropriate manner deemed by FINRA. Once an investor reports fraudulent activity, the brokerage firm must investigate and work towards a resolution. The SEC Regulation S-ID, 17 CFR 248.201(d)(2) requires firms to aid the customer in mitigating any misconduct. Invesco has refused to take any responsibility for addressing the unjust account breach. In fact, Invesco refused communication with their customer and deferred the issue out to its lawyers within a week.
Unfortunately, this is not the first nor last case of an identity fraud perpetrator successfully looting a retirement account when a brokerage firm fails to perform their supervisory duties. Therefore, investors should periodically review their brokerage firm accounts for any suspicious activity. Call your brokerage firm to report any unauthorized transactions made on your account. If your brokerage firm does not help, contact Malecki Law for a free consultation. Malecki Law’s securities attorneys recovered millions for investors in FINRA arbitrations for brokerage firm negligence.