On September 25, 2017, the Securities and Exchange Commission announced the creation of an Enforcement Division “Cyber Unit” that will focus on cyber-related violative conduct. The timing of this is much more than coincidental; indeed it’s obvious. Just last week, SEC Chairman Jay Clayton disclosed: 1) a 2016 intrusion of the SEC’s EDGAR system due to a software vulnerability in the test filing component of the system, resulting in access to nonpublic information; and 2) the creation of a senior-level cybersecurity working group. Since the disclosure of the EDGAR breach, the financial press has reported that SEC Enforcement, the Secret Service, and the FBI have been investigating, and that Chairman Clayton asked the SEC’s Office of Inspector General to investigate. On September 26, 2017, Chairman Clayton appears before the Senate Committee on Banking, Housing, and Urban Affairs where he will … Read More »
SEC Charges Investment Adviser with Failure to Adopt Proper Cybersecurity Policies and Procedures Prior to Cyberattack
On Tuesday, September 22, 2015, the SEC charged an investment adviser with failing to adopt a written policy and procedure reasonably designed to safeguard customer records and information. The charge spawned from a July 2013 cyberattack on the investment adviser’s third party-hosted server, which potentially compromised the personally identifiable information (“PII”) of over 100,000 individuals stored on the server. Without admitting or denying the SEC’s findings, the investment adviser has agreed to settle the charge for approximately $75,000 and cease and desist from committing or causing any future violations of the SEC’s “Safeguards Rule.”
Rule 30(a) of Regulation S-P (the “Safeguards Rule”) requires every investment adviser registered with the SEC to adopt written policies and procedures reasonably designed to safeguard customer records and information. Specifically, the policies and procedures must be reasonably designed to: (1) insure the security and confidentiality of … Read More »
SEC to Examine Registered Broker-Dealers’ and Investment Advisers’ Procedures for Countering Cybersecurity Threats
Background and Purposes
On April 15, 2014, the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) issued a “Risk Alert” explaining a new initiative to assess cybersecurity preparedness in the securities industry. Although not an official rule, regulation or statement of the SEC, the Risk Alert advised that OCIE will be conducting examinations of more than 50 registered broker-dealers and registered investment advisers, regarding their cybersecurity and data security procedures and policies.
OCIE’s cybersecurity initiative is designed to obtain information about the industry’s recent experiences with certain types of cyber threats. The examinations will focus on the following topics: the firm’s cybersecurity governance, identification and assessment of cybersecurity risks, protection of networks and information, risks associated with remote customer access and funds transfer requests, risks associated with vendors and other third parties, detection of unauthorized activity, and experiences with … Read More »