Online Brokerage Accounts:

Like many investors, you may enjoy some of the conveniences of an online brokerage account, like checking your brokerage account information at any time of day or night, buying and selling securities, or even transferring money between your brokerage account and another account. But if you don't take steps to protect your personal information when you go online, you could be telling your own story of identity theft.

How Online Identity Theft Can Happen

Many identity thieves use malicious software programs to attack vulnerable computers of online users. These software programs can monitor your computer activity and send information back to the thief's computer. Sometimes, these programs will log your key strokes, which allows identity thieves to easily obtain username and password information for any of your online accounts, including your brokerage account.

Other identity thieves "phish" for your personal information. "Phishing" involves the use of fraudulent emails and copy-cat websites to trick you into revealing valuable personal information - such as your account number, your social security number, and the username and password information you use when accessing your account. Sometimes fraudsters will use phishing scams to try to get you to download keystroke logging or other malicious software programs unsuspectingly.

But not all identity thieves have gone "high tech." Many still use less sophisticated ways of stealing your personal information, such as looking over your shoulder when you're typing sensitive information or searching through your trash for confidential account information.

How to Protect Yourself Online

You'll need to protect yourself against identity thieves, whether hackers, phishers, or snoops, when you use your online brokerage account. Here are a few suggestions on ways to keep your personal information and money more secure when you go online:

• Beef Up Your Security. Personal firewalls and security software packages (with anti-virus, anti-spam, and spyware detection features) are a must-have for those who engage in online financial transactions. Make sure your computer has the latest security patches, and make sure that you access your online brokerage account only on a secure web page using encryption. The website address of a secure website connection starts with "https" instead of just "http" and has a key or closed padlock in the status bar (which typically appears in the lower right-hand corner of your screen).

Security Tip: Even if a web page starts with "https" and contains a key or closed padlock, it's still possible that it may not be secure. Some phishers, for example, make spoofed websites which appear to have padlocks. To double-check, click on the padlock icon on the status bar to see the security certificate for the site. Following the "Issued to" in the pop-up window you should see the name matching the site you think you're on. If the name differs, you are probably on a spoofed site.

• Use a Security Token (if available). Using a security token can make it even harder for an identity thief to access your online brokerage account. That's because these small number-generating devices offer a second layer of security - a one-time pass-code that typically changes every 30 or 60 seconds. These unpredictable pass-codes can frustrate identity thieves. While fraudsters can use keystroke logging programs to obtain regular username and password information, they can't use these programs to obtain the security token pass-code. Ask your brokerage firm if you can protect your online account with a security token or similar security device.
   
• Be Careful What You Download. When you download a program or file from an unknown source, you risk loading malicious software programs on your computer. Fraudsters often hide these programs within seemingly benign applications. Think twice before you click on a pop-up advertisement or download a "free" game or gadget.
   
• Use Your Own Computer. It's generally safer to access your online brokerage account from your own computer than from other computers. If you use a computer other than your own, for example, you won't know if it contains viruses or spyware. If you do use another computer, be sure to delete all of the your "Temporary Internet Files" and clear all of your "History" after you log off your account.
   
• Don't Respond to Emails Requesting Personal Information. Legitimate entities will not ask you to provide or verify sensitive information through a non-secure means, such as email. If you have reason to believe that your financial institution actually does need personal information from you, pick up the phone and call the company yourself - using the number in your rolodex, not the one the email provides!

Security Tip: Even though a web address in an email may look legitimate, fraudsters can mask the true destination. Rather than merely clicking on a link provided in an email, type the web address into your browser yourself (or use a bookmark you previously created).

• Be Smart About Your Password. The best passwords are ones that are difficult to guess. Try using a password that consists of a combination of numbers, letters (both upper case and lower case), punctuation, and special characters. You should change your password regularly and use a different password for each of your accounts. Don't share your password with others and never reply to "phishing" emails with your password or other sensitive information. You also shouldn't store your password on your computer. If you need to write down your password, store it in a secure, private place.
   
• Use Extra Caution with Wireless Connections. Wireless networks may not provide as much security as wired Internet connections. In fact, many "hotspots" - wireless networks in public areas like airports, hotels and restaurants - reduce their security so it's easier for individuals to access and use these wireless networks. Unless you use a security token, you may decide that accessing your online brokerage account through a wireless connection isn't worth the security risk. You can learn more about security issues relating to wireless networks on the website of the Wi-Fi Alliance.
   
• Log Out Completely. Closing or minimizing your browser or typing in a new web address when you're done using your online account may not be enough to prevent others from gaining access to your account information. Instead, click on the "log out" button to terminate your online session. In addition, you shouldn't permit your browser to "remember" your username and password information. If this browser feature is active, anyone using your computer will have access to your brokerage account information.

How to Know if Your Identity Has Been Stolen

Sometimes, it can be extraordinarily difficult to determine whether someone has stolen your identity. If you take the steps below, you may be able to find out whether you've been victim of identity theft and protect yourself from further harm:

• Read Your Statements. Don't toss aside your monthly account statements! Read them thoroughly as soon as they arrive to make sure that all transactions shown are ones that you actually made, and check to see whether all of the transactions that you thought you made appear as well. Be sure that your brokerage firm has current contact information for you, including your mailing address and email address. If you see a mistake on your statement or don't receive a statement, contact your brokerage firm immediately.
   
• Monitor Your Credit Report. Reviewing your credit report may alert you to unauthorized activity, and, therefore, can be an effective way to fight identity theft. You can obtain a free credit report every 12 months from three different credit bureaus by contacting the Annual Credit Report Request Service. 

Investor Tip:  Read your brokerage account agreement carefully because many firms take the position that you are responsible for the security of your account information, such as your username, password, and account number.  In addition, your brokerage account agreement may provide information about what specific steps you should take if you notice any unauthorized account activity.

What to Do if You Run into Trouble 

Always act quickly when you come face to face with a potential fraud, especially if you've lost money or believe your identity has been stolen.

• Identity Theft. If you think that your personal information has been stolen, visit the Federal Trade Commission's Identity Theft Resource Center at www.consumer.gov/idtheft/index.html for information on how to file a complaint and control the damage. 
   
• Securities Scams. Before you do business with any investment-related firm or individual, do your own independent research to check out their background and confirm whether they are legitimate. For step-by-step tips and links to helpful websites, please read Check Out Brokers and Advisers and SIPC Exposes Phony "Look-Alike" Web Site. Report investment-related scams to the SEC using our online Complaint Center. 
   
• Phishy Emails. If a phishing scam rolls into your email box, be sure to tell the company right away. You can also report the scam to the FBI's Internet Fraud Complaint Center at http://www.ifccfbi.gov/. If the email purports to come from a brokerage firm or mutual fund company, be sure to pass along that tip to the SEC's Enforcement Division by forwarding the email to enforcement@sec.gov. 

Additional Resources 

For more information, please read: 

• Internet Fraud: How to Avoid Internet Investment Scams 
   
• "Phishing" Fraud: How to Avoid Getting Fried by Phony Phishermen 
   
• NASD Investor Alert - Protect Your Online Brokerage Account: Safety Should Come First When Logging In and Out 
   
• NASD Investor Alert - Well-Traveled Fraud: Advance Fee-Scams Target Non-U.S. Investors Using Fake Regulator Web Sites and False Broker Identities
   
• FDIC Consumer Alert - ID Theft: Strategies and Help for Fighting Back

http://www.sec.gov/investor/pubs/onlinebrokerage.ht