Financial Scams – Insuring the IFA’s Own Losses and the Client’s Losses

More and more stories are coming to light of fraudulent schemes continuing to evolve at an alarming rate (please see recent ATEB news articles). Vigilance across the whole firm is essential; however should a member of staff overlook making, for example, a precautionary telephone call, the losses to the client could be significant. Seven-figure losses are not unusual.

If you think that you don’t need to worry about this eventuality because it’s all covered in your Professional Indemnity policy, you must think again. Whilst your PI policy may cover the losses of your clients, it will almost definitely not cover your own. The only comprehensive protection for the IFA is to be found in a Cyber policy and not in the Professional Indemnity policy.

You will need a specialist to analyse your current arrangements and advise you what extra protection you may require, which may include:

  • damage to your systems on your network as a result of an attack, whether internal or external, computer virus, denial of service attack or merely an operational error which causes a data loss;
  • lost revenue and increased costs incurred due to attack or virus;
  • theft of the firm’s money obtained during an attack on your network;
  • the threat by an extortionist to damage your network, steal money, steal or disseminate confidential information on your network or deface your website;
  • breach (not just from a cyber-attack and not limited to information stored on the network) of individuals’ private information, e.g. employee records and customers’ personally identifiable information;
  • disclosure of corporate confidential information or trade secrets;
  • theft of clients’ money obtained during an attack on your network
  • damage to other networks, e.g. your unintentional transmission of a virus;
  • disparagement or defamation which occurs by electronic means, e.g. email, internet forums or your website;
  • PR Expenses and the costs of notifying customers that their data has been compromised, including providing ongoing support and credit monitoring services to them.

 

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Our View

Given the drastic scale of potential financial loss you may be concerned that insurance premiums will be correspondingly expensive. Actually, cyber insurance premiums are modest in comparison to the potential scale of a cyber-event including the potential for loss of revenue from downtime and reputational damage.

Action Required By You

ATEB can introduce you to a specialist insurance broker who is one of the few firms taking an early lead in this area. They will help you to understand the problems and to analyse the best possible solutions.

If you are interested in finding out more, please use our contct form here

Pease note that in line with our transparent charging policy, ATEB does not receive any form of benefit for making this introduction. This article is issued for information purposes only and to highlight the potential issues.

About the Author

Steve is an ATEB Director and has a deep understanding of all matter regulatory, built up over his 30 years + in the industry. With a training background and a technical brain, he overseas numerous complex projects and client implementation work.

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