Retail* stock investing is becoming pretty common with the rise of online stock brokerages. Bloggers write about it and recommend it. But have you thought about what happens to your stock certificates and remaining cash in your brokerage account if SHTF and was hacked? Personally I have confidence in my broker but I do recognize the possibility that it may be vulnerable to hacking as most secured websites on the internet are. It is prudent to always keep a personal and updated record of your current porfolio of stockholdings and cash to allow for a reconstitution of your records in case the broker’s website gets hacked.
Here we have a guest post from Dan of stocktrades.ca giving some advice for what to do in case this hopefully unlikely event happens. Dan is based in Canada so this post is applicable for brokerages based in Canada as well. I did notice, however, that Philippine online brokerages also have a counterpart brokerage insurance referred to here, which I shall write about later, once I catch some time! Update: my post for Philippine stockbrokers is here.
If Your Brokerage Is Hacked, Are Your Investments Protected?
Have you ever though what would happen if your brokerage was hacked? Are your investments safe? It’s a scary thought. Something that can keep you up at night.
Much has been written about protecting your personal identity. Preventing fraudsters from opening accounts in your name, making purchases using your stolen credit cards, etc. But what about your investments? The money you already saved or invested for retirement.
Despite the best efforts of your brokerages, a virtual security breach is a real possibility. No matter how large or small the firm, they are equally susceptible to a cyber-attack. Hence, it’s important for you to understand your rights and your responsibilities.
The good news is, you are protected. Let me explain how.
Most Canadian brokerages guarantee your investments. Most even use the term “100% Guaranteed”.
In other words, they will reimburse you for cash, bonds, stocks or other types of investments that are lost due to fraudulent activity by an unauthorized third party. This is no doubt reassuring.
However, there is an important caveat.
You have a responsibility to keep your account information secure and private. If your losses occur due to your own negligence you will be out of luck.
In a one-off hack, you can rest assured that your brokerage will investigate and confirm that you kept your end of the deal. Speaking of which, are you aware of what your responsibilities are?
Did you know?
Your investments are protected if your brokerage goes belly-up. The Canadian Investor Protection Fund (CIPF) is there to protect your investments up to $1 million, in the rare case of brokerage insolvency.
Any brokerage that is a member of the IIROC (Investment Industry Regulatory Organization of Canada) is a CIPF member. Is your brokerage?
Always ensure your brokerage has CIPF coverage. It’s a must.
The most important way for you to ensure your investments are protected is to adhere to the terms and conditions of your agreement.
We know, most of you glance over these documents. They are long, complicated and difficult to understand.
We get it. Trust us, we understand your pain.
However, this is the most important step in protecting your investments. Why?
Each brokerage will have slightly different terms and conditions.
The last thing you want is to lose your retirement savings because you failed to update your computer firewalls. Yep, we’ve come across that stipulation.
To help guide you along, here are some of the most common terms:
- Create strong passwords and security questions.
- 123456 is not a strong password and “What is my birthday?” is not a strong security question.
- Keep your login and account information private.
- No, sharing with your spouse, children or any other family member is not considered private!
- Keep your contact information up to date.
- Have you moved, changed email, got a new cell number?
- Stay abreast of account terms and conditions.
- Be sure to read and understand any updates to your account terms and conditions. Don’t delete!
- Report any suspicious activity or unauthorized transactions immediately.
- Its important to monitor your account and react in a timely manner if you notice or suspect any fraudulent activity.
- Ensure your browser and operating system are up to date.
- Updates and patches often contain important security updates. Don’t be negligent.
Did you know?
There is a quick way to tell if you are signing in to a secure network. Canadian brokerages rely on the highest level of security to protect your accounts. This means your account sign-in page web address should start with HTTPS, not HTTP.
The “S” at the end of HTTP stands for “Secure”. It means that the communication between your browser and the website is secured.
Never log in to your accounts if there is no “S”! You might be the victim of a phishing scam!
The important takeaway here is if you do your part, there is nothing to be worried about. You will be reimbursed if you are victim of a cyber attack.
Canadian brokerages take your personal data and investments very seriously. Do you? If you haven’t read the terms and conditions of your agreements, then you aren’t.
Don’t wait, educate. Do your part to protect your future.
If you want to check out a brokerage that I believe is the best of the best in terms of online security, check out this review of Questrade.
Dan Kent is a writer and co founder of Stocktrades.ca. A DIY investor for 8 years now, Dan has a combination of dividend, growth and real estate investments in his portfolio and is looking to continually grow his net worth. You can check his website out at stocktrades.ca or follow him on Twitter at @Stocktrades_CA.
*Retail stock investors refer to individual investors like you and me, as opposed to institutional investors like corporations.