SEC fined RIA $1Mil for cyber-security failure: Make CYBER-SECURITY a Priority in 2020
Protect your RIA in this area, make it a priority in your budget now BEFORE a breach happens.
On September 26, 2018, the SEC Division of Enforcement announced that it settled claims with an RIA that agreed to pay $1 million to settle charges related to its failures in cyber-security policies and procedures surrounding a cyber breach that compromised personal information of thousands of clients. The SEC charged the advisory firm with violating the “Safeguards Rule and the Identity Theft Red Flags Rule”. This enforcement action was the first SEC action to charge a firm with violations of the Identity Theft Red Flags Rule.
Make sure your Chief Compliance Officer (CCO) is up to speed and focusing on cyber-security this year. In many cases, the greatest cyber-security risk for an RIA is its human staff. It is essential that your entire staff is property trained and supervised by your CCO.
Click here to see SEC’s 2020 Exam Priorities Press release.
RIA’s need to ensure that information security policies and procedures and training procedures are specific enough to properly respond to and mitigate a cyber-security breach.
In the SEC’s 2018 Fiscal Year Enforcement Report, it emphasizes that the Enforcement Division has “more than 225 cyber-related investigations ongoing.”
There has been a growing number of SEC enforcement cases related to investment adviser cyber-security. In 2015, an RIA firm agreed to settle charges due to its failure to establish the required cyber-security policies and procedures in advance of a breach that compromised the personally identifiable information (PII) of approximately 100,000 individuals, including thousands of the firm’s clients. In that case, the SEC found that the firm violated the “Safeguards Rule” by failing to adopt written policies and procedures to ensure the security and confidentiality of PII and protect it from anticipated threats or unauthorized access.
Cheers from Sonja Rae @ RIA-CCO. Have a wonderful rest of your week! 🙂
