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Ameritrade Notifies Customers Of Data Breach -- Proactively

Online brokerage TD Ameritrade is warning customers today that some of their personal information, including e-mail addresses, was accessed by an external source. Its handling of the situation shows there's some progress being made toward more proactive disclosure of security breaches, since the disclosure comes before any known loss of personal identity data such as Social Security numbers.

In a letter to account holders (full disclosure: I received the letter), CEO Joe Moglia explains:

While investigating client reports about the industry-wide issue of investment-related SPAM, we recently discovered and eliminated unauthorized code from our systems. This code allowed certain information stored in one of our databases, including e-mail addresses, to be retrieved by an external source.

Please be assured that UserIDs and passwords are not included in this database, and we can confirm that your assets remain secure at TD AMERITRADE.

He goes on to say the code was quickly eliminated and customer assets are protected in the event of any loss. Of course, if someone's identity gets stolen as a result of this, that's another matter. The letter also says:

While Social Security numbers are stored in this particular database, we have no evidence to establish they were retrieved or used to commit identity theft.

I'll take the liberty of appending "yet" to that final sentence.

As a potential identity theft victim, this explanation doesn't give me much comfort. It makes me even more uneasy about sharing personal data or using online financial services. Obviously there was a significant security hole that allowed the "unauthorized code" to get in. I just hope that gap has been closed permanently.

Although User IDs and passwords apparently weren't breached, I'd still like to see TD Ameritrade put tougher account access requirements in place. (Vanguard Group and HSBC Direct are two examples of online transaction sites with a more rigorous sign-on process).

This will be the third time Ameritrade has made it onto the Privacy Rights Clearinghouse's list of data breaches. The first two were small in comparison with many of the higher-profile breaches that have occurred.

Yet I appreciate what appears to be a proactive stance by Ameritrade to make this notification. Let's just hope it results in nothing more than some additional spam.

Update 2:25 p.m on 9/14/07: See our complete news coverage by Sharon Gaudin here.

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