On August 7, 2017, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) released a Risk Alert summarizing its conclusions from a year-long review of the cybersecurity practices of a 75 firms — including broker-dealers, investment advisers and investment companies. The sweep, OCIE’s Cybersecurity 2 Initiative, ran from September 2015 to June 2016 and covered the review period from October 2014 through September 2015. It follows OCIE’s 2014 Cybersecurity 1 Initiative, during which the staff examined a different group of firms from January 2013 to June 2014. The Risk Alert that followed the first sweep was released in early 2015.
The focus of OCIE’s second sweep was asset management firms’ written cybersecurity policies and procedures and, critically, their implementation. While the Risk Alert acknowledges that cybersecurity preparedness has improved across the industry since the first sweep exam, it emphasizes that significant deficiencies persist. The Risk Alert identifies common elements of policies and procedures that the staff regards as robust controls. The Risk Alert also stresses that, going forward, OCIE will increase its review of firms’ implementation of appropriately-tailored policies; merely having well‑drafted policies “on the books” but not applied will not suffice. Continue Reading