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Consumer Protection & Privacy

Peter S. Vogel: SEC Declares Planning for Prevention and Detection of Cyber Intrusions is Essential!

By Peter S. Vogel

In a recent speech SEC Chair Mary Jo White declared that while “cybersecurity attacks cannot be entirely eliminated, it is incumbent upon private fund advisers to employ robust, state-of-the-art plans to prevent, detect, and respond to such intrusions.” On October 16, 2015 Chair White also stated that:

Cybersecurity is the shared responsibility of all regulators and market participants, including investment advisers, to guard the broader financial system against intrusions.

She also relied on the SEC Cybersecurity Guidance issued in April 2015:

  • Conduct a periodic assessment of: (1) the nature, sensitivity and location of information that the firm collects, processes and/or stores, and the technology systems it uses; (2) internal and external cybersecurity threats to and vulnerabilities of the firm’s information and technology systems; (3) security controls and processes currently in place; (4) the impact should the information or technology systems become compromised; and (5) the effectiveness of the governance structure for the management of cybersecurity risk. An effective assessment would assist in identifying potential cybersecurity threats and vulnerabilities so as to better prioritize and mitigate risk.
  • Create a strategy that is designed to prevent, detect and respond to cybersecurity threats. Such a strategy could include: (1) controlling access to various systems and data via management of user credentials, authentication and authorization methods, firewalls and/or perimeter defenses, tiered access to sensitive information and network resources, network segregation, and system hardening;5 (2) data encryption; (3) protecting against the loss or exfiltration of sensitive data by restricting the use of removable storage media and deploying software that monitors technology systems for unauthorized intrusions, the loss or exfiltration of sensitive data, or other unusual events;6 (4) data backup and retrieval; and (5) the development of an incident response plan. Routine testing of strategies could also enhance the effectiveness of any strategy.
  • Implement the strategy through written policies and procedures and training that provide guidance to officers and employees concerning applicable threats and measures to prevent, detect and respond to such threats, and that monitor compliance with cybersecurity policies and procedures. Firms may also wish to educate investors and clients about how to reduce their exposure to cyber security threats concerning their accounts.

Clearly all businesses are impacted, not just those regulated by the SEC.

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