In Guidance Update No. 2015-02, the Division of Investment Management (Division) of the Securities and Exchange Commission (SEC) issued some high-level suggestions concerning the importance of cybersecurity for registered investment companies and registered investment advisers. The guidance outlines a number of measures these entities should consider for addressing cybersecurity risks. Of course, while some of these and other measures may have specific application to certain sectors of the financial services industry, many of these measures can and should be applied in most organizations, regardless of industry.
Increasingly, companies are realizing the need to tighten their policies and practices concerning information risk, but not sure about where to start or what framework to follow. There are, for sure, industry specific rules and regulations, such as the HIPAA privacy and security regulations that apply to healthcare providers, healthcare clearinghouses, health plans and their respective business associates, as well as state law mandates, such as the data security regulations in Massachusetts. The endnotes in this Guidance discuss and provide helpful links to more specific SEC rules concerning the safeguarding of personal information, such as the Red Flag rules. But among these standards are a number of common threads, many of which are contained in the Division’s guidance referred to above. These include:
- Conduct a risk assessment designed to help the company understand the “nature, sensitivity and location of information that the firm collects, processes and/or stores, and the technology systems it uses” as well as the effectiveness of its governance structure to ensure appropriate controls are in place. This should be done regularly, perhaps annually. It also should be done when there are material changes in the business that are reasonably likely to alter the risks to sensitive data.
- Develop access management policies. Not everyone in an organization should have access to all of its data. The first step is finding out who has access to what. See first bullet above…you might be surprised by what you find; scale back from there.
- Prepare a written information security program that addresses necessary and appropriate administrative, physical and technical safeguards that you have implemented.
- Strengthen perimeter defenses – maintain up-to-date firewalls, malware, and virus protections. Thefederal Office for Civil Rights claimed a healthcare provider failed to do this, and it cost the company $150,000.
- Get control of mobile storage devices and consider whether a more formal “Bring Your Own Device” program is needed.
- Address whether and under what circumstances encryption is warranted. Some applications may slow down operations, but that level of protection may help the company avoid a significant exposure.
- Develop and practice an incident response plan. Writing down a plan for responding to a data breach is a good start, but for the members of your team that would be called upon to carry out the plan, a few dry runs would be beneficial.
- Don’t leave your staff in the dark about what you have done – train your employees and create security awareness throughout the organization.
- Make sure the third party service providers that the company relies upon are taking similar steps to safeguard data on your behalf.
Will following just these points mean you are 100% compliant with all of the company’s regulatory and contractual obligations pertaining to privacy and data security. Probably not. But they certainly will get you a lot closer and minimize a substantial amount of risk.