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ARTICLE · 08 OCTOBER 2019

FCM Settles CFTC Charges Resulting From Cybersecurity Failure

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A futures commission merchant ("FCM") settled CFTC charges for failing to enact sufficient cybersecurity measures and to notify customers of a $1 million cyber breach.

United StatesFinance and Banking
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A futures commission merchant ("FCM") settled CFTC charges for failing to enact sufficient cybersecurity measures and to notify customers of a $1 million cyber breach.

According to the Order, the FCM, Phillip Capital Inc. ("PCI") failed to implement sufficient cybersecurity and customer disbursement policies and procedures that ultimately allowed hackers to access their email systems and withdraw customer funds. After discovering $1 million in customer funds had been withdrawn, PCI (i) approved reimbursement of the mistakenly wired customer funds, (ii) notified the CFTC Division of Swap Dealer and Intermediary Oversight the day of the fraudulent wire and (iii) implemented measures to prevent further fraudulent transfers. The CFTC found that PCI failed to disclose in a timely manner the material facts of the cyber breach and fraudulent wire to current and prospective customers.

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