The SEC Office of Compliance Inspections and Examinations (OCIE) released the results of its Cybersecurity 2 sweep initiative. OCIE reviewed policies and procedures and assessed cybersecurity preparedness of 75 firms with respect to governance and risk assessment, access rights and controls, data loss prevention, vendor management, training, and incident response. OCIE found that most firms have adopted policies and procedures, conducted penetration tests and vulnerability scans, used a system to prevent data loss, installed software patches, adopted response plans, and conducted vendor risk assessments. OCIE recommended that registrants better tailor policies and procedures, conduct enhanced employee training, replace outdated systems, and ensure remediation of identified vulnerabilities. OCIE warned that cybersecurity “remains one of the top compliance risks for financial firms” and that it “will continue to examine for cybersecurity compliance procedures and controls, including testing the implementation of those procedures and controls at firms.”
OUR TAKE: Advisers, broker-dealers, and funds that fail these compliance best practices risk falling behind their competitors and incurring the wrath of the OCIE examiners. Compliance officers must become conversant in the required elements of an adequate cybersecurity program and implement the required policies and procedures, testing, and remediation.