Brokerage Account Hacked: What to Do If Your Online Account Is Compromised
When you hold your money in a bank account or process transactions using a credit card, there are legal protections in place to offer zero-liability protection. This means that if you experience unauthorized transactions due to fraud, as the account owner, your money isn’t on the line. You’ll be reimbursed for the damages, and your account will be reinstated as if nothing happened.
Unfortunately, for investors, there is no such policy and the law governing unauthorized electronic fund transfers from brokerage accounts is much murkier. Given that most brokerage accounts are protected by a simple username and password, hacking and cyber-attacks are on the rise. This leaves many investors wondering what would happen to their accounts if they got hacked—and what to do about it. Data breaches can result in identity theft, so it’s important to recognize and respond quickly to such incidents.
Your first step if you suspect you’ve been hacked is to check your specific brokerage’s policy around fraudulent activity. Most of the common brokerages do cover 100% of losses that arise due to unauthorized activity, but they differ in what they consider to be “unauthorized activity.” Start by learning what your brokerage requires for the situation to be considered a true hack. If hackers gain access, your financial or personal information could be stolen, putting your accounts and identity at risk.
Introduction to Hacking Risks
The convenience of managing your finances online—whether through a bank account, brokerage account, or retirement account—has transformed the way most people invest and save for the future. However, this ease of access comes with increased risk. As more investors rely on online platforms to manage their financial accounts, the threat of hacking, data breaches, and unauthorized transactions has grown significantly.
A data breach can expose sensitive account information, such as your social security number, account logins, and passwords, putting your assets at risk. Hackers who gain access to your investment account can initiate unauthorized online transactions, compromise your account, and potentially cause significant financial losses. This is why online security is more important than ever for anyone with a brokerage account or other financial accounts.
Understanding the legal protections available to you is crucial. For example, while bank accounts are typically insured by the FDIC, brokerage accounts do not have the same government-backed guarantee. Instead, many brokerage firms—like Charles Schwab, Fidelity, and Vanguard—offer their own guarantees to cover losses from unauthorized activity in their accounts. However, these guarantees often require you to take specific steps, such as enabling two-step verification, using strong passwords, and promptly reporting any suspicious activity. Failing to follow these requirements could mean your losses are not covered.
To protect your assets, it’s essential to regularly review your account statements and trade confirmations, monitor for any unauthorized activity, and immediately report anything suspicious to your investment firm. Setting up account alerts for logins and transactions can provide an added layer of security, helping you catch unauthorized activity early. Additionally, using two-factor authentication and strong, unique passwords for each account can significantly reduce your risk of being hacked.
Cyber attacks are constantly evolving, so it’s important to stay vigilant. Protect your devices with up-to-date anti-virus software, avoid clicking on suspicious links or emails, and keep your operating system and applications current. If you ever notice unusual activity in your brokerage or bank accounts, contact your investment firm, bank, and credit card companies right away to report the incident and prevent further unauthorized transactions.
By understanding the risks and taking proactive steps to secure your financial accounts, you can better protect your assets and your financial future. Remember, the best defense against hacking is a combination of strong online security practices, awareness of your legal protections, and immediate action if you suspect your account has been compromised.
Charles Schwab’s Policy for Hacked Accounts
The policy: “Schwab will cover 100% of any losses in any of your Schwab accounts due to unauthorized activity. To ensure your protection under this guarantee, it is your responsibility to safeguard your account information and report any unauthorized transactions to us as quickly as possible.” As a brokerage firm, Schwab is subject to regulatory oversight and investor protection rules.
As a regulated brokerage firm, Schwab is subject to investor-protection rules and regulatory oversight. In theory, this guarantee means that customers whose accounts are hacked should have their losses restored once the fraud is reported.
In practice, disputes often arise over how Schwab applies this policy. Customers involved in Schwab account hacking lawsuits and arbitration claims frequently report that reimbursement is denied based on undefined terms such as what qualifies as “timely” reporting or whether the customer is deemed to have “granted access” to the account.
Schwab has taken the position that losses may not be covered if account credentials were disclosed, including in phishing or impersonation schemes. Customers, by contrast, often argue that being tricked by sophisticated fraud should not negate Schwab’s security guarantee. These disagreements have become a central issue in Schwab account hacking lawsuits and arbitration proceedings.
Vanguard’s Policy for Hacked Accounts
The policy: “We’ll reimburse you the full amount that we determine was taken from your Vanguard account in an unauthorized online transaction on vanguard.com. If there’s evidence you neglected to reasonably safeguard your account, further investigation may be necessary to determine whether we can issue a reimbursement.”
While the policy suggests that hacked accounts should be reimbursed, disputes often arise in cases involving phishing attacks. In Vanguard account hacking lawsuits and arbitration claims, customers report that reimbursement may be denied when Vanguard concludes the customer disclosed login credentials in response to a phishing email, text message, or spoofed communication.
Customers frequently argue that sophisticated phishing schemes—designed to impersonate legitimate Vanguard communications—should not be treated as voluntary access or negligence. Whether falling victim to phishing constitutes a failure to “reasonably safeguard” an account has become a central issue in Vanguard account hacking disputes.
Fidelity Account Hacking Lawsuit and the 30-Day Reporting Rule
The policy: “Fidelity will reimburse you for losses from unauthorized activity in covered accounts occurring through no fault of your own. You must frequently check your account information and promptly review correspondence, account statements, and confirmations as they are made available to you, but no later than 30 days after that information is posted to your account or delivered to you.”
Under this policy, customers generally must report unauthorized activity within 30 days in order to qualify for reimbursement. In Fidelity account hacking lawsuits and arbitration claims, disputes often arise when losses are reported after that window or when Fidelity determines that the customer contributed to the breach.
Fidelity also takes the position that losses are not covered if account information was shared with another person. As a result, customers who fall victim to phishing attacks—where login credentials are disclosed in response to spoofed emails, texts, or fake websites—may be denied reimbursement, even when the access was obtained through deception rather than voluntary sharing.
E*TRADE Account Hacking Lawsuit and Ambiguous Reimbursement Standards
The policy: “We offer the E*TRADE Complete Protection Guarantee, which protects your privacy, your assets, and every transaction you make. Complete fraud protection: $0 liability for unauthorized use of your account.”
E*TRADE’s customer protection language is less specific than that of other major brokerage firms but appears to follow a similar framework. The policy suggests that reimbursement may be available for unauthorized activity, while leaving significant discretion to the company in determining what qualifies as “unauthorized use.”
In E*TRADE account hacking lawsuits and arbitration claims, disputes often center on this ambiguity. Customers report that reimbursement may be denied when ETRADE concludes that account access resulted from the customer providing login credentials, including in phishing or impersonation scenarios. As with other brokerage firms, the lack of a clear definition of unauthorized use has become a recurring point of contention in ETRADE hacking disputes.
Common Themes in Policies
You’ll notice that there are clear themes throughout these policies. In order to protect your assets, you should take care to do three things diligently.
- First, you should take every precaution to protect your own account. Set up a strong password or passphrase that you don’t repeat on any other platforms or accounts. If your brokerage offers two-step verification, enable that feature for an added layer of protection. Then, turn on account alerts for activities like account logins or password changes. While you might get a few more texts and emails due to your own legitimate activity, these barriers are significant in the event that you do get hacked.
- Second, review your account activity on a regular basis—at least every 30 days. Look at your account balances, executed and pending trades, and account deposits or withdrawals. If anything looks suspicious, report it right away—even if you don’t have a complete understanding of the situation yet. The brokerage team will work with you to get to figure out what happened, and you’re more likely to be reimbursed if you submit your claim right away.
- Lastly, use common sense to avoid risky situations for your accounts. Try not to log into your brokerage accounts on public devices or use unfamiliar Wi-Fi networks. In some cases, these networks are disguised to look like they belong to a nearby business. By logging into your account through the network, you’ve just given hackers access to your account.
Common sense should also apply to your response to email inquiries and phishing attempts. Don’t ever provide your account login information to someone else. Brokerage firms will not ask for this information as they have other methods to verify your identity. If you’re asked for other sensitive information, you can always contact your brokerage’s customer service department directly and ask them to verify the communication. If they can’t confirm that they’ve been trying to reach you, ignore the outreach entirely.
By following these steps, you’ll be on the right track to recover any lost assets and protect yourself from future hacks. When in doubt, take any additional precaution you can—you won’t regret it.
Were you Hacked?
If your brokerage account was hacked, or you experienced unauthorized transactions after a phishing attack, you may have legal options—even if your brokerage denied reimbursement. Customers across the country have raised similar issues in Schwab account hacking lawsuits, Vanguard account hacking lawsuits, Fidelity account hacking lawsuits, and E*TRADE account hacking lawsuits, particularly where firms claim losses were not “unauthorized” because credentials were disclosed through deception. MDF Law focuses on representing investors harmed by account takeovers, phishing schemes, and brokerage security failures. If you believe your brokerage unfairly denied responsibility, you can learn more about your rights and potential claims by contacting MDF Law.