Morgan Stanley on Tuesday agreed to pay the Securities and Trade Fee (SEC) a $35 million penalty for information safety lapses that included unencrypted exhausting drives from decommissioned information facilities being resold on public sale websites with out first being wiped.
The SEC motion mentioned that the improper disposal of hundreds of exhausting drives beginning in 2016 was a part of an “intensive failure” over a five-year interval to safeguard prospects’ information as required by federal rules. The company mentioned that the failures additionally included the improper disposal of exhausting drives and backup tapes when decommissioning servers in native branches. In all, the SEC mentioned information for 15 million prospects was uncovered.
“MSSB’s failures on this case are astonishing,” mentioned Gurbir S. Grewal, director of the SEC’s enforcement division, utilizing the initials for Morgan Stanley Smith Barney, the total identify of the agency. “Clients entrust their private info to monetary professionals with the understanding and expectation that it is going to be protected, and MSSB fell woefully brief in doing so.”
A lot of the failure stemmed from the 2016 rent of a transferring firm with no expertise or experience in information destruction providers to decommission hundreds of exhausting drives and servers containing the info of thousands and thousands of consumers. The transferring firm obtained 53 RAID arrays that collectively contained roughly 1,000 exhausting drives, and it additionally eliminated about eight,000 backup tapes from one of many Morgan Stanley information facilities.
The unnamed transferring firm initially contracted with an IT specialist to wipe or destroy any delicate information saved on the drives. Finally, the transferring firm stopped working with that specialist and started promoting the storage gadgets to an organization that in flip bought them at public sale. The brand new firm was by no means vetted by Morgan Stanley or accredited as a contractor or subcontractor within the decommissioning venture.
In 2017, greater than a yr after the info heart’s decommissioning, Morgan Stanley officers obtained an e mail from an IT marketing consultant in Oklahoma, informing them that arduous drives he bought from a web-based public sale website contained Morgan Stanley information.
In a criticism, SEC officers wrote, “In that e mail, Guide knowledgeable MSSB that ‘[y]ou are a serious monetary establishment and needs to be following some very stringent tips on the way to cope with retiring hardware. Or on the very least getting some sort of verification of knowledge destruction from the distributors you promote tools to.’ MSSB ultimately repurchased the exhausting drives in Guide’s possession.”
The SEC motion additionally mentioned that lots of the storage gadgets didn’t have encryption turned on, although the choice existed. Even after the funding agency started utilizing encryption choices in 2018, solely new information written to the disks was protected. In some instances, information nonetheless wasn’t correctly encrypted due to a flaw in an unidentified vendor’s product.
With out admitting or denying the SEC claims, Morgan Stanley agreed to Tuesday’s discovering that it violated the Safeguards and Disposal Guidelines beneath Regulation S-P and agreed to pay the $35 million penalty.
In a press release, Morgan Stanley officers wrote, “We’re happy to be resolving this matter. We have now beforehand notified relevant shoppers relating to these issues, which occurred a number of years in the past, and haven’t detected any unauthorized entry to, or misuse of, private shopper info.”