Money Matters - Simplified

Congratulations, You've Been Breached

On our Discount Brokers discussion board the other day, new Fool Community member Tastylunch was looking to open a new account with a discount brokerage. Tastylunch was looking for a secure one, having noted some security problems at brokerages such as TD Ameritrade (Nasdaq: AMTD).

Congratulations, You've Been BreachedGet original file (14KB)

I read through the many responses from helpful fellow board denizens and followed a link over to the TD Ameritrade website to read about the security breach in question. There I found lots of information, such as this report:

While investigating client reports of SPAM, we recently discovered and eliminated unauthorized code that allowed an external source to retrieve certain client information from one of our databases. At no time were clients' financial assets held at TD AMERITRADE touched as a result of this issue. UserIDs and passwords were not stored in this particular database.

Yes, this looks worrisome, but it also made me a little happy. Why? Well, I'm a TD Ameritrade customer, for one thing, and I sensed a lot of candor here, with the company spelling out what did and didn't happen.

Another thought I had was expressed by board denizen JeffLandon. He said: "It's possible that Ameritrade is the MOST secure now after taking such a big hit to their reputation. They immediately brought in experts to go over their code." I was thinking the same thing, recalling a visit I made in the early 1990s to Three Mile Island with a group from my business school class. During the visit, I was struck by how seriously the nuclear plant addresses safety matters. I believe that while other plants might not really believe a disaster can happen to them, the folks at Three Mile Island know better and are more vigilant. They've had their wake-up call.

Similarly, after the tampering scare Johnson & Johnson (NYSE: JNJ) faced with Tylenol in the 1980s, don't you think the company might take the issue of container integrity more seriously than other firms?

This is not to say that TD Ameritrade is the best brokerage for you, or for anyone; that's for you to decide, after some research. But next time you see a company going through a scandal or crisis, ask yourself whether it's likely to inflict permanent damage -- or whether it may end up making the company stronger.