Financial fraud has always been a problem, but the Internet has enabled entirely new ways of stealing money. We recently received an alert about a new scheme to defraud advisors and their clients.
The scam begins with an email to an advisor that includes a bogus invoice. The email appears to come from a client, and it includes a request to send money directly to the business listed on the invoice. The invoice might appear to be for purchases such as antiques or art, or for such things as attorney fees or legal settlements. The advisor sends the money, and the fraud is complete.
The payee is often in a foreign country or at an overseas bank. This makes it nearly impossible to catch the thieves or reclaim the money. The FBI estimates that more than 2,000 victims lost more than $214 million to this scam between October 2013 and December 2015.
My firm has a policy of not sending clients’ money to third parties based on email communication alone. But we go beyond simply confirming client requests by phone. It is our policy to get to know our clients personally. We know if they have a pattern of sending money to third parties. In all cases, we require a written letter of authorization as well as verbal confirmation from the client before any money is sent out.
The recent news that personal information about more than 20 million government employees, contractors and others was stolen highlights the importance of the security of your financial information. It also makes dealing with a financial firm where you are an individual, not a number, increasingly important.
NOTE: We recently submitted this article to NerdWallet who posted it on their Advisor Voices board.
That New York Stock Exchange “Glitch”
On Wednesday, July 8th the NYSE halted trading for just under four hours. Since it coincided with some other computer snafus, including one which caused United Airlines to cancel some flight and delay others, rumors of computer hacking by foreign forces flew.
My source on the floor of the exchange – Art Cashin – characterized it as a “malfunction” which was detected early and trading was halted so that there would be no trading errors. The NYSE is sensitive to this since the “Flash Crash” of 2010 during which the exchange computers ran amok and sent orders to the wrong places. It resulted in a very brief period when suddenly Blue Chip stocks traded for pennies causing losses to investors and traders alike.
To prevent another occurrence of 2010 the NYSE put in safeguards and Cashin commented “While I would prefer not to go through it again, the safeguards clearly worked and mispricing and losses were averted.”
When the NYSE closed down, investors were able to trade stocks on 11 other exchanges including NASDAQ, proving that redundancy in the US markets prevents markets from seizing up.
Despite the glitch, the market yesterday was reacting primarily to the melt-down of an overheated Chinese market; a situation that the Chinese government was attempting to halt. As of trading this morning, that seems to have happened and the US markets are up about 1% as of 11:00 AM today.
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