Banking giant Morgan Stanley will pay $1 million as penalty for failure to protect information on roughly 730,000 of its clients, the Securities and Exchange Commission (SEC) said Wednesday.
According to the SEC, the bank “failed to adopt written policies and procedures reasonably designed to protect customer data,” which enabled a then-employee to access and transfer data on the customer accounts accounts to a personal server, which the was ultimately hacked by third parties.
“A likely third-party hack of Marsh’s personal server resulted in portions of the confidential data being posted on the Internet with offers to sell larger quantities,” the SEC said.
In January 2015, Morgan Stanley acknowledged that account information for about 900 of its clients, including account numbers and names, was briefly posted on the Internet and, once detected, was “promptly removed.”
The employee at the time, Galen J. Marsh, was was criminally convicted for his actions in 2015 and received 36 months of probation and ordered to $600,000 in restitution.
According to the SEC, Morgan Stanley violated Rule 30(a) of Regulation S-P, also known as the “Safeguards Rule.”
“Given the dangers and impact of cyber breaches, data security is a critically important aspect of investor protection. We expect SEC registrants of all sizes to have policies and procedures that are reasonably designed to protect customer information,” Andrew Ceresney, Director of the SEC Enforcement Division, said in a statement.
The SEC alleges that Morgan Stanley didn’t audit or test the “relevant authorization modules” or monitor or analyze employees’ access to portals containing sensitive data.
Morgan Stanley agreed to settle the charges and pay the $1 million without admitting or denying the findings.