SEC Staff to Conduct Broker-Dealer and Investment Adviser Examinations Focused on Cybersecurity

April 22, 2014

The Securities and Exchange Commission’s (the “SEC” or the “Commission”) Office of Compliance Inspections and Examinations (“OCIE”) announced in an April 15, 2014 Risk Alert (the “Alert”) that it will be conducting examinations of more than 50 registered broker-dealers and registered investment advisers, focusing on areas related to cybersecurity. This is consistent with recent indications, from both individual commissioners and the staff, that emphasize the importance of cybersecurity to the financial sector. Information security has been identified as one of OCIE’s “most significant initiatives across the entire N[ational] E[xam] P[rogram].” Just last month, the Commission sponsored a roundtable focused on cybersecurity during which Commission Chair Mary Jo White indicated that cybersecurity threats are “of extraordinary and long-term seriousness.” Commissioner Luis Aguilar remarked at the roundtable that “the increased pervasiveness and seriousness of the cybersecurity threat raises questions about whether more should be done to ensure the proper functioning of the capital markets and the protection of investors.”4 This newly announced cybersecurity-focused examination initiative further demonstrates that the Commission’s staff is ready to take action. Financial sector compliance professionals would be well advised to do the same.

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