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Financial Services Law Insights and Observations

District Court approves class action settlement against securities trading platform and broker-dealer

Courts Privacy, Cyber Risk & Data Security Class Action Data Breach Securities

Courts

On May 16, the U.S. District Court for the Northern District of California granted final approval of a settlement in a class action against a securities trading platform and broker-dealer (defendant) for allegedly allowing unauthorized users access to customers’ accounts. As described in plaintiffs’ motion for preliminary approval of settlement, class members alleged the defendant “lacked security measures used by other broker-dealer online systems,” which allowed “thousands of [the defendant’s] customer accounts [to be] accessed by unauthorized users.” Based on these allegations, class members brought claims for negligence, breach of contract, and violations of various state consumer privacy, competition, and advertising laws. Under the terms of the settlement, the defendant must provide cash payments of up to $260 each to settlement class members who submit a claim, up to a total amount of $500,000. Additionally, among other things, the defendant must “provide two years of credit monitoring and identity theft protection services to those who elect to receive it,” must “maintain improvements to its security protocols and policies to decrease the risk of unauthorized access to its customers’ accounts,” and must “respond effectively to instances of potential unauthorized access” in the future.