Sense on Cents

High five to our friends at The SIPA for further exposing, no pun intended, a story that employees (including high ranking officials) at the SEC seem to have had a predilection with internet porn sites. The Washington Times reported, SEC Workers Investigated for Porn-Surfing.

You can’t make this stuff up. Kudos again to The SIPA for putting the proper level of seriousness into its review of this story:

Who cares if employees watch Porn?
Millions of American Investors should!

The Washington Times reported yesterday that employees and high ranking officials of the Securities and Exchange Commission were accessing pornography sites and watching hours of porn every day for a long time. I am not going to sit here as judge and jury and throw down the 10 commandments at the SEC employees involved in this. What goes on in the privacy of ones house is generally none of our business, unless they are harming someone or breaking the law. Despite all the hoopla this story has garnered, I think a bigger story is being missed by the press and the SEC agency.

The employees were using Government computers and internet to access these sites and quite frankly every single broker and brokerage firm in America should consider sending a notice to its current clients that their identity, their accounts and their privacy may have been violated. The employees and especially the Supervisors of the SEC have very sensitive information on their computer. Everything from New Account forms with client Social Security numbers and addresses to account statements are very likely to be on computers at the SEC. I wish I could say that’s all but lets not forget the SEC sits on top of a mountain of non public information and filings from publicly traded companies. All this information plus possible insider information may be sitting in the hands of some Russian hacker who is drooling at the thought of trading ahead of news tomorrow in an account he created using some unassuming American’s account information he obtained.

This is such a serious issue that we believe the SEC should offer Credit protection and Insurance to any and all clients affected. Porn is not all it seems to be and hackers have been using ‘Free Porn’ Sites for years to get embedded into computers across the world. I recently received multiple e-mails from a friend that kept trying to refer me and about 500 members of his outlook address book to go to a Canadian On Line Pharmacy to buy Viagra or Cialis. When I asked him why he sent this (I thought maybe my wife asked him!) he had no clue this was even taking place. It turns out that he had a virus that took over his computer unbeknown to him! He admitted he had been ‘messing around ‘with some of the ‘free porn’ sites a few weeks ago. Of course they are free because their goal is to get into your private data!Imagine for a second if one of these same hackers now had access to an employee of the SEC’s computer and sent out a similar e-mail but instead of directing thousands to an on line pharmacy, they asked that all clients contact him immediately with their Social Security Number, Account number and anything else they can get their hands on. The worst part is that brokers, clients and public companies would receive an OFFICIAL SEC E-mail requesting these documents, so who wouldn’t believe it to be true?

This is not the first time security has been compromised in the securities industry. In 2006 the Boca Offices of FINRA had over 30 computers stolen from their offices that contained scanned account forms and statements as well as transcripts from on the record interviews conducted with employees of a well known Florida Brokerage Firm. The SEC and FINRA place a lot of emphasis on privacy and security when it comes to the Firm’s Written Supervisory Procedures, yet they are very loose and lackadaisical themselves. Every day publicly traded companies converse with the SEC over proposed filings and disclosures and inside information that could swing stocks up or down. It’s quite scary to think that hackers may know whether the FDA is going to reject a cancer drug of Imclone or approve the use of a new flu virus for an upstart $1.00 company. The SEC should take the steps that FINRA didn’t and come forward and admit the mistake, conduct a thorough investigation into the possible breaches, offer credit monitoring to any and all possibly effected and to install internet monitors. For a couple Miller Lite’s my neighbor John will come over and prohibit certain sites from being accessed.He recently blocked “YOU-TUBE” from his house because he didn’t want his kids watching certain videos. The SEC has a choice right now: Do the right thing and make sure everyone is covered or they can put their heads in the sand like all the other Government bureaucracies and hope and pray this does not come back to bite them. They should also invest a few hundred thousand ( or a few Miller-Lite’s??) into blocking web sites.

Great job by The SIPA to highlight the risks embedded in this tawdry, pathetic situation. Please visit their site regularly for excellent insights and analysis of developments within the broker-dealer and financial regulatory communities.

As for the SEC, managers’ supervisory responsibilities include monitoring e-mail and internet traffic. Issue a warning, then try the two strongest words an employee can ever hear, “You’re fired.”

LD

This entry was posted on Thursday, February 4th, 2010 at 6:50 AM and is filed under General, SEC. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.