State securities regulators focus on cybersecurity
According to the North American Securities Administrators Association (NASAA) state securities examiners are finding increased cybersecurity exposures among state-registered investment advisers.
In their examinations of advisers in 41 U.S. jurisdictions last year, state examiners found cybersecurity issues in more than one-quarter (26%) of their examinations, up from 23% during the last series of coordinated examinations in 2017.
What cyber exposures did the regulators find?
In the top five:
Are cybercriminals targeting smaller financial advisors?
Yes. Big breaches make headlines, but small firms are a cybercriminal’s bread and butter. For this reason, NASAA is making cybersecurity a priority for state securities examiners.
According to the Association, more than three-quarters of the nearly 18,000 state-registered investment advisers are one- to two-person shops, with assets of $100 million or less. These are ripe for the picking by cybercriminals, says the NASAA.
Of the asset-managing investment advisers included in the coordinated examinations, 67% had assets under management between $30 million and $100 million and 33% had assets under management of less than $30 million. Under the Dodd-Frank Act, about 2,100 mid-sized investment advisers with assets under management between $30 million and $100 million switched from federal to state oversight in 2013.
Where are advisors deficient?
Ranking exposures by the percentage of deficiencies the NASAA found in the 1,078 coordinated state examinations it held last year this time were:
How can advisors fight cybercriminals?
NASAA recommends the following “Best Practices” as a guide to assist investment advisers in developing compliance practices and procedures:
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