TENNESSEE: August 30, 2024. The Guiliano Law Group filed an action before the Financial Industry Regulatory Authority against an “Internet Only” broker-dealer, an “Internet Only” bank affiliate, and its Clearing Firm for the failure to supervise, and the violation of The Electronic Funds Transfer Act and the SEC “Customer Protection Rule” for hacking and theft of funds from the financial accounts of two elderly persons including a retired police officer.
“The rapid growth of online and mobile banking in recent years has placed consumers in the crosshairs of increasingly sophisticated scams. Convincing impersonation scams by text message and over the phone, known as phishing, and mobile device hacks, such as SIM swaps, pose ever-present threats to consumers.” The State of New York v. Citibank N.A.., Case No. 24 Civ. 0659 (S.D.N.Y Jan. 30, 2024).
The Electronic Fund Transfer Act (“EFTA”) 15 U.S.C. § 1693, as amended, effective June 21, 2020, establishes a basic framework of the rights, liabilities, and responsibilities of participants in the electronic fund and remittance transfer systems. The EFTA and its implementing Regulation E (“Reg. E”) are landmark protections that shift liability for unauthorized transfers from consumers to banks.
The EFTA governs any “electronic fund transfer,” (“EFT”) which it defines as any transfer of funds that is initiated through an electronic terminal, telephonic instrument, or computer that orders, instructs, or authorizes a “financial institution,” to debit or credit an account. 15 U.S.C. § 1693a(7).
Securities broker-dealers are “financial institutions,” as defined by the EFTA. Securities broker-dealers are not exempt. However, securities broker-dealers are excluded from the consumer protection provisions of the EFTA only where the “primary purpose” of the “transfer of funds is for the purchase or sale of a security or commodity, if the security or commodity is purchased or sold through a broker-dealer regulated by the Securities and Exchange Commission.” Subsection (c)(4) of §205.2.
The EFTA and Reg. E protect consumers from unauthorized EFTs and other errors. EFTs are unauthorized when they do not benefit consumers and are made by persons who are not the consumers or other authorized users. 15 U.S.C. § 1693a(12).
The Electronic Fund Transfer Act also provides for statutory damages including the recovery of of costs, and reasonable attorney’s fees as provided by the U.S. Code § 1693m (Civil liability).
If you have suffered losses as the result of cybertheft or the fraudulent or unauthorized removal or withdrawal from your securities account you should consult with qualified counsel to determine your rights and responsibilities.
Guiliano Law Group, P.C.
Our practice is limited to the representation of investors. We accept representation on a contingent fee basis, meaning there is no cost to you unless we make a recovery for you. There is never any charge for a consultation or an evaluation of your claim. For more information, contact us at (877) SEC-ATTY.
