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SettlementHigh RiskMultistate

State AGs Fine Morgan Stanley $6.5M for Data Security Failures

Morgan Stanley Smith Barney LLCNovember 16, 2023New York Attorney General

Penalty Amount

$6,500,000

Summary

Morgan Stanley failed to properly decommission computer devices containing unencrypted customer data, leading to the sale of devices with personal information at auction and missing servers with potential data. A multistate coalition secured a $6.5 million settlement requiring Morgan Stanley to implement enhanced data security measures.

Remedy

Morgan Stanley must pay a $6.5 million fine and adopt a comprehensive information security program, including encryption, incident response plans, hardware tracking, and vendor risk assessments.

Monetary PenaltyCompliance Program

Contract Impact

In-house legal teams should review vendor agreements, especially those involving data destruction, asset disposal, or IT decommissioning services, to ensure they include specific clauses on data security standards, encryption requirements, vendor monitoring, and liability for data breaches. Customer agreements may need enhancements to data protection obligations, and internal policies should address hardware inventory controls and decommissioning procedures. Changes could involve mandating security certifications for vendors, implementing rigorous audit trails for disposed assets, and adding clear remedies for unauthorized data access to prevent incidents like unencrypted data being sold at auction or missing servers.

Contract Search Terms

vendor oversight clausedata destruction services agreementhardware inventory requirementencryption mandatedecommissioning protocolthird-party security assessmentasset disposal termscustomer data handlingdata breach liabilitysecurity audit clause

Violation Types

Entity Details

Entity

Morgan Stanley Smith Barney LLC

Also known as: Morgan Stanley

Industry

Financial Services

Multistate Coalition

Official Sources

Source Evidence

Entity Name
"Morgan Stanley Smith Barney LLC (Morgan Stanley)"
Fine Amount
"a $6.5 million fine"
Violation Types
"Morgan Stanley failed to decommission its computers and erase unencrypted data in certain computer devices that were later auctioned while still containing consumers’ personal information"

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