Merchant Securities said Thursday that its stock broking subsidiary, Merchant Securities Group Ltd. has entered into an agreement with the Financial Services Authority or FSA to settle an investigation carried over by the FSA over its data security procedures. The agreement provides for Merchant Securities paying GBP 77 thousands as fine.
The investigation was conducted to check Merchant Securities Group's systems and controls for the protection of customer information, said the company.
The FSA in its communication had said this was the first time it fined a stock broking firm for weak data security controls.
The FSA said Merchant Securities had inadequate procedures for verifying the identities of customers that contacted the firm by telephone. The firm relied on being able to identify customer's voice and also spoke about informal matters like holidays and hobbies.
The regulatory body found that back up tapes containing unencrypted customer information were stored overnight in a bag at the home of a member staff. However during the investigation, the FSA did not find any proof of customer information being lost or stolen.
The FSA noted that Merchant Securities Group co-operated fully with it and agreed to settle at an early stage of investigation, qualifying for a 30% discount on the actual fine of GBP 110 thousand.
Margaret Cole, Director of Enforcement at the FSA, said, "It is unacceptable that despite increased awareness of data security issues, a firm should be so careless about its systems for protecting customers' personal details."
Shares of MERC.L closed regular trading on June 12th at 18.50 pence.
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