The conduct in question, ASIC said, involves a fraudster impersonating a client by mimicking their email address or establishing an address markedly similar to that of an existing client.
“After establishing email contact with a broker, the fraudster then issues instructions to liquidate the client's positions and distribute the proceeds to alternative bank accounts including third party accounts,” said the corporate regulator.
In one of the recent incidents ASIC said it became aware of potentially fraudulent conduct when a number of alerts were generated by ASIC’s market intelligence and analysis surveillance system in response to price and volume anomalies.
“This prompted our market surveillance analyst to examine the share trading more closely, which revealed a pattern of unprofitable trading - we contacted the participant involved and were advised that an account intrusion had in fact occurred,” said the corporate regulator.
ASIC advised stockbrokers to pay particular attention to client accounts which appear to be trading unprofitably and to verify the origin of such orders.
“Likewise, they should examine the source of failed log-in attempts,” said ASIC. “Complaints from clients about unusual trading on their accounts may also be indicative of an account intrusion and should be investigated.”
According to the regulator, some brokers are being targeted as part of a fraud syndicate involving individuals in South Africa.
ASIC explained client mail is intercepted by fraudsters in South Africa and details including the client’s full name, address, date of birth and share trade account information is stolen.
“The fraudsters then supply relevant information to Australian brokers, including certified copies of passports and drivers' licences, to affect share sales,” said ASIC. “The legitimate clients' securities have then been sold without their approval or knowledge.”
ASIC said to reduce the likelihood of this type of fraud occurring with South Africa-based clients, brokers should cease shareholder reference number trades for international clients.
The corporate regulator also recommended calling the client once a request is received to verify certain details such as the client’s middle name and date of birth and requesting documents for an account opening process for international clients be verified at an embassy.
“Stockbrokers should also encourage clients to change their account passwords regularly” said ASIC.
