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Morgan Stanley on Tuesday agreed to pay the Securities and Trade Fee (SEC) a $35 million penalty for knowledge safety lapses that included unencrypted exhausting drives from decommissioned knowledge facilities being resold on public sale websites with out first being wiped.
The SEC motion mentioned that the improper disposal of 1000’s of exhausting drives beginning in 2016 was a part of an “in depth failure” over a five-year interval to safeguard clients’ knowledge as required by federal laws. 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 knowledge for 15 million clients was uncovered.
“Astonishing failures”
“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 complete identify of the agency. “Clients entrust their private data 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 knowledge destruction providers to decommission 1000’s of exhausting drives and servers containing the information 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 8,000 backup tapes from one of many Morgan Stanley knowledge facilities.
The unnamed transferring firm initially contracted with an IT specialist to wipe or destroy any delicate knowledge saved on the drives. Finally, the transferring firm stopped working with that specialist and commenced 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 authorised as a contractor or subcontractor within the decommissioning mission.
In 2017, greater than a yr after the information middle’s decommissioning, Morgan Stanley officers obtained an e mail from an IT guide in Oklahoma, informing them that arduous drives he bought from a web based public sale website contained Morgan Stanley knowledge.
In a grievance, SEC officers wrote, “In that e mail, Advisor knowledgeable MSSB that ‘[y]ou are a significant monetary establishment and needs to be following some very stringent tips on the right way to cope with retiring {hardware}. Or on the very least getting some sort of verification of information destruction from the distributors you promote tools to.’ MSSB ultimately repurchased the exhausting drives in Advisor’s possession.”
The SEC motion additionally mentioned that most 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 knowledge written to the disks was protected. In some instances, knowledge 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 an announcement, Morgan Stanley officers wrote, “We’re happy to be resolving this matter. Now we have beforehand notified relevant purchasers concerning these issues, which occurred a number of years in the past, and haven’t detected any unauthorized entry to, or misuse of, private shopper data.”
