SEC Charges JPMorgan, UBS, and TradeStation for Deficiencies Relating to the Prevention of Customer Identity Theft

The Securities and Exchange Commission today separately charged J.P. Morgan Securities LLC, UBS Financial Services Inc., and TradeStation Securities, Inc. for deficiencies in their programs to prevent customer identity theft, in violation of the SEC’s Identity Theft Red Flags Rule, or Regulation S-ID.

According to the SEC’s orders, from at least January 2017 to October 2019, the firms’ identity theft prevention programs did not include reasonable policies and procedures to identify relevant red flags of identity theft in connection with customer accounts or to incorporate those red flags into their programs. In addition, the SEC’s orders find that the firms’ programs did not include reasonable policies and procedures to respond appropriately to detected identity theft red flags, or to ensure that the programs were updated periodically to reflect changes in identity theft risks to customers.

"Regulation S-ID is designed to help protect investors from the risks of identity theft," said Carolyn M. Welshhans, Acting Chief of the SEC Enforcement Division's Crypto Assets and Cyber Unit. "Today’s actions are reminders that broker-dealers and investment advisers must design and operate identity theft prevention programs that are appropriately tailored to their businesses and update them in response to the increased threat and changing nature of identity theft."

JPMorgan: The JPMorgan order also finds that the firm failed to exercise appropriate and effective oversight of all service provider arrangements and failed to train staff to effectively implement one of its identify theft prevention programs in 2017. 

UBS: The UBS order also finds that the firm failed to periodically review new or existing types of customer accounts to determine whether and how its identity theft prevention program should apply to them; failed to adequately involve the board of directors in the oversight, development, implementation, and administration of the program; and failed to train its employees to effectively implement the program.

TradeStation: The TradeStation order also finds that the firm failed to adequately involve its board of directors in the oversight, development, implementation, and administration of its identity theft prevention program and failed to exercise appropriate and effective oversight of service provider arrangements.

The SEC’s orders find that each firm violated Rule 201 of Regulation S-ID. Without admitting or denying the SEC’s findings, each firm agreed to cease and desist from future violations of the charged provision, to be censured, and to pay the following penalties: JPMorgan: $1.2 million, UBS: $925,000, and TradeStation: $425,000.

The SEC’s investigations were conducted by Laura D’Allaird, Kathleen Hitchins, Jennie B. Krasner, and Martin Zerwitz of the Crypto Assets and Cyber Unit and supervised by Paul Kim, Deborah Tarasevich, and Carolyn Welshhans. The examinations that led to the investigations were conducted by Colin Ray, Christine Sibille, Lindsay Topolosky, and Eric Garvey of the Division of Examinations.