Financial regulators are increasingly zoning in on brokerages' vulnerability to computer hackers, a focus likely to hit smaller financial services firms especially hard as they try to convince examiners that their safeguards are up to snuff.
At least 88 percent of securities brokerages and 74 percent of investment advisory firms it examined have been targets of cyberattacks, the U.S. Securities and Exchange Commission (SEC) said in a Feb 3 report. The SEC examined 57 broker-dealers and 49 investment advisers during a 2014 cybersecurity initiative.
The SEC and Financial Industry Regulatory Authority (FINRA) have made checking up on firms’ cybersecurity practices a priority for their examiners this year. [ID: nL1N0UL0WD]
Even the largest firms, with armies of technology professionals at their disposal, can struggle to answer examiners' queries about cyber-preparedness. The task is an even bigger challenge at smaller firms, where preparations fall to a handful of individuals, and sometimes one.
How much work is involved? "That’s where your soul breaks," said David Edwards, president of Heron Financial Group, LLC, an investment advisory firm in New York that manages $171 million in assets.