You can’t miss the news – new cybersecurity rules for advisors are coming. Though the Securities Exchange Commission (SEC) and others have issued guidance and best practices on cybersecurity for some time, registered investment advisers (RIAs) and funds will now be held accountable for complying with updated rules for protecting against cybersecurity threats and attacks.
The SEC’s proposed new rules and amendments under the Investment Advisers Act of 1940 and the Investment Company Act, focus on risk management, reporting, disclosures and recordkeeping.
Though the comment period for the proposed amendments is still open, advisors should take stock of what will likely be required now to ensure that their cybersecurity protocols and procedures measure up. Not sure how to assess whether your current cybersecurity oversight and preventative measures pass the test? Our downloadable checklist – summarized below – can help you get started:
Written cybersecurity plans, policies and procedures. The SEC expects RIAs to review and formalize their cybersecurity risk plans, policies and procedures. This means firms must have written documents that detail workflows and responsibilities and that are clear to all employees.
Policies and procedures for data access management. The SEC is very clear that it wants firms to have detailed Acceptable Use Policy (AUP) documents in place. Who has access to your data, how is it classified and who controls this access? Firms will need to put into place protections like multifactor authentication (MFA), least-privilege access rights and zero-trust monitoring of end devices to comply with the forthcoming new rules.
Protection for data and information. Data must be protected at rest and when in motion, so RIAs will need appropriate technologies and management for keeping information secure at all times. This means relying on things like encryption, threat detection and prevention and mobile device management — technologies that can address their vulnerabilities.
Continuous monitoring. The SEC says it will require advisors “…to have measures to detect, respond to and recover from a cybersecurity incident.” It is expecting that RIAs will continuously monitor their environments for threats and vulnerabilities. Now is the time for firms to consider integrated platforms that can do just that – monitor, alert, respond to and remediate cybersecurity attacks.
Incident response planning and recovery. Every RIA will need a documented incident response plan it can point to in the event of a cyberattack. The plan should be tested for effectiveness and speed of recovery, with gaps addressed to assure business continuity in the event of a significant incident or breach, regardless of where the firm’s data resides.
Reporting and disclosure. The new rule makes very clear that RIAs are on the hook for reporting significant cyber events to the SEC within a relatively short period of time. The Form ADV-C filing requirement means that qualifying incidents must be reported within 48 hours. There are now additional sections on Form AV Part 2A where advisors are required to disclose significant cybersecurity risks and incidents, going back two fiscal years.
Formal accountability. Firms need to identify and establish the internal team responsible and accountable for managing cybersecurity risk. In addition, the firm’s board of directors is now accountable for understanding and addressing the firm’s cybersecurity threats and must approve its cybersecurity policies and procedures. Key point: regardless of whether they outsource cybersecurity, firms are still responsible for that oversight.
Feeling a bit overwhelmed? Don’t be. Over the next several months, we’ll continue to share content and advice from our inhouse technology and cybersecurity experts on exactly what your firm should be doing and how to educate employees to be best prepared.
In the meantime, reach out to us with your questions. We know that keeping up with the demands of the ever-evolving world of technology and cybersecurity while trying to run your RIA and serve clients can be a challenge. That’s why we make it our specialty – so you don’t have to. We are here to partner with you on cybersecurity management today, not just when the SEC shows up.
Need help with your cybersecurity policy? Visory’s RIA consultants can get you on the right track. Fill out our form below to get started.
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