Just last week I wrote a post addressing Dropbox and its use by financial advisers. It’s worth reading, but the summary is:
- If you are regulated by FINRA, don’t use Dropbox (or any web-based service where you place client information) without the approval of your broker-dealer’s compliance department. Even after approval, document what your policies and procedures are to keep client information safe.
- If you are regulated by the SEC or state as a registered investment adviser, document the steps you take to protect the security and confidentiality of customer information placed on web-based services such as Dropbox. You may optionally apply your own encryption to files saved in Dropbox to better protect them from unauthorized access.
So what happened over the weekend?
During system maintenance on Sunday, June 19, Dropbox introduced a bug into its authentication mechanism. Click here to read Dropbox’s explanation of the issue.
In summary, for a period of about four hours, correct passwords were not needed to log in and access Dropbox accounts. All that was required was a valid email address associated with an active account.
Make no mistake, this is a serious security issue.
Anyone who might have guessed an adviser’s email address (or even look it up on the adviser’s website) which happens to be used for a Dropbox account storing client files would have been able to access, view, download, et. al. those files without needing a valid password.
However, for advisers who encrypt or otherwise protect documents stored on Dropbox with access passwords, unauthorized access to the Dropbox account would not have yielded access to the contents of the files; only the file names would be visible (for password-protected documents).
The security lapse should never have happened, but it did. I said last week that adding an extra layer of security and/or encryption was optional. I feel I must be more specific in my recommendation of Dropbox.
If you choose to use Dropbox to store and share documents with client information, encrypt and/or password protect those documents prior to placing them in Dropbox.
Yes, this extra security makes sharing documents a bit more convoluted, as clients with whom you share files must remember the password required to access documents. But consider the alternative without the use of the extra layer of security in Sunday’s scenario.
And really, you shouldn’t have to apply your own security, but Dropbox isn’t touting their service for the enterprise market or regulated industries like financial services. They’re first and foremost a company providing a product for consumers. Should you choose to use Dropbox for client documents, take the necessary steps to better protect client information from unauthorized access.
Also, consider alternatives to Dropbox such as SugarSync, Carbonite, Egnyte, Wuala, and more. They’re worth investigating and performing your own due diligence.