Just five days after announcing a 2016 hack of its EDGAR filing system, the U.S. Securities and Exchange Commission (SEC) has outlined a two-pronged cybersecurity plan intended to protect investors, identify and pursue trading and investment misconduct, and give the federal agency the tools it needs to monitor and crack down on clever and fast-moving cyber-thieves.
The two-pronged security initiative will address a variety of currencies, transactions and assets in today’s financial services system, including distributed ledger technology (DLT), initial coin or cryptocurrency offerings (ICOs), attempts at market manipulation, misconduct on the so-called “dark web,” unscrupulous investing practices, and failure by companies to report cybersecurity breaches.
Writing this week in the Securities Law Blog (Part 2), West Palm Beach attorney Laura Anthony, a securities investment specialist and founder of Legal and Compliance, LLC, provides details on the SEC’s plans to create a Cyber Unit that will target cyber-related misconduct, and additional plans for a retail strategy task force that will provide more scrutiny of the retail investment market.
SEC Chair Jay Clayton is seeking $100 million from the House Committee on Financial Services for the beefed-up cybersecurity and monitoring initiatives.
The Cyber Unit will work closely with the SEC’s Office of Compliance, Inspections and Examinations, and its Division of Enforcement. Specifically the unit will address numerous issues, including:
· Market manipulation or misconduct that arises from false online information, the dark web, hacked information, or intrusions into retail brokerage accounts
· Cyber-related threats related to trading platforms or critical market infrastructures
According to Clayton, the agency will leverage the Cyber Unit to “coordinate information sharing, risk monitoring and incident response efforts throughout the agency.” It also will track whether publicly traded companies properly report and disclose cyber-related issues.
Secondarily, the Retail Strategy Task Force will focus on fraud-related issues, including unscrupulous investments, abuses in wrap-fee accounts, failure by investors and companies to disclose fees or risky ventures, abusive investment practices, investor activity in products such as inverse exchange-traded funds (ETFs) for long-term investments, and other issues.