This morning brings alarming news from TD AMERITRADE (Nasdaq: AMTD). The company identified a breach in its database system, spotting and eradicating unauthorized code that was giving spammers access to client e-mail addresses, telephone numbers, and home addresses.
The same internal database also houses client account numbers, birthdates, and Social Security numbers, though a third party's investigation discovered no evidence of identity theft, beyond spamsters looking for leads to deluge with stock-pumping emails.
Still, it's troubling. If hackers out to pimp thinly traded securities can do it, what's to stop tech thieves with more sinister intentions? Thankfully, the discount broker has corrected the problem, and it will retain ID Analytics' services to protect itself from the potential of future breaches.
This isn't a pleasant situation for the industry as a whole. Customers will feel vulnerable, even with safeguards in place, making this more than TD AMERITRADE's problem. It's also an issue for Charles Schwab (NYSE: SCH), E*Trade (Nasdaq: ETFC), optionsXpress (Nasdaq: OXPS) and any of the other, smaller brokerages.
Brokers do take security seriously. Some discounters like Scottrade have even teamed up with McAfee (NYSE: MFE) to provide a complimentary one-year subscription of McAfee's virus-zapping software. That's not the same as protecting a company's own database integrity, though such measures are obviously a high priority at any institution handling delicate financial information.
For the most part, brokerages have done a decent job of protecting data for the most part. Have you seen any major stories of hackers milking accounts dry? Me neither. Beyond phishing scams that dupe unsuspecting victims into surrendering their personal data, the brokerages' protection seems as close to rock-solid as it can get. Even the breach at TD AMERITRADE didn't come within spitting distance of client assets.
However, with identity theft on the rise, it pays to be careful. It wouldn't hurt to ask your broker what's it's doing to prevent something like this from happening to you.
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