A firm that lost millions of dollars of client funds in two separate cyber incidents is to pay $850,000 and agree to a cease-and-desist order and censure, to settle charges with the Securities and Exchange Commission.
New York-based registered transfer agent Equiniti Trust Company LLC, formerly known as American Stock Transfer & Trust Company LLC, was charged by the SEC for failing to protect investors’ funds from theft or misuse.
The charges relate to two incidents, in 2022 and 2023, where cyber intrusions led to the loss of a combined $6.6. million in client funds.
The first involved the hijack of an email chain between the firm and a US-based public-issuer client. The unknown threat actor involved posed as an employee of the issuer and instructed American Stock Transfer to issue millions of new shares of the issuer, liquidate those shares, and send the proceeds to an overseas bank.
The second involved Social Security numbers stolen from American Stock Transfer clients that were used to create fake accounts that were automatically linked to genuine client accounts despite mismatched names and other information. This enabled the fraudster to liquidate securities held in the genuine accounts and transfer funds to external bank accounts.
“American Stock Transfer failed to provide the safeguards necessary to protect its clients’ funds and securities from the types of cyber intrusions that have become a near-constant threat to companies and the markets,” said Monique C. Winkler, Director of the SEC’s San Francisco Regional Office. “As threat actors become more sophisticated in the cyber space, transfer agents must act to implement and maintain effective safeguards and procedures around client assets.”
American Stock Transfer managed to recover approximately $2.6 million of the lost funds and all clients were fully reimbursed.
The SEC’s order finds that Equiniti violated Section 17A(d) of the Securities Exchange Act of 1934 and Rule 17Ad-12 thereunder.
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