More On Legal & Compliancefrom The Advisor's Professional Library
- Code of Ethics Rule The Code of Ethics Rule, found in Rule 204A-1, uses severe consequences for violation to help ensure investment advisors will do the right thing.
- Using Solicitors to Attract Clients Rule 206(4)-3 under the Investment Advisors Act establishes requirements governing cash payments to solicitors. The rule permits payment of cash referral fees to individuals and companies recommending clients to an RIA, but requires four conditions are first satisfied.
Fulfilling its promise to scrutinize broker-dealers’ cybersecurity policies this year, the Financial Industry Regulatory Authority has issued a targeted exam letter to firms stating that the self-regulator is assessing how firms manage cybersecurity threats.
In the exam letter, FINRA states that it is conducting its assessment “in light of the critical role information technology (IT) plays in the securities industry, the increasing threat to firms' IT systems from a variety of sources, and the potential harm to investors, firms and the financial system as a whole that these threats pose.”
Specifically, FINRA says it will be looking at firms' policies in the following areas:
—approaches to information technology risk assessment;
—business continuity plans in case of a cyberattack;
—organizational structures and reporting lines;
—processes for sharing and obtaining information about cybersecurity threats;
—understanding of concerns and threats faced by the industry;
—assessment of the impact of cyberattacks on the firm over the past 12 months;
—approaches to handling distributed denial of service (DDoS) attacks;
—insurance coverage for cybersecurity-related events; and
—contractual arrangements with third-party service providers
FINRA says it has four broad goals in performing its assessment:
--to understand better the types of threats that firms face;
--to increase our understanding of firms' risk appetite, exposure and major areas of vulnerabilities in their IT systems;
--to understand better firms' approaches to managing these threats, including through risk assessment processes, IT protocols, application management practices and supervision; and
--as appropriate, to share observations and findings with firms.
The Securities and Exchange Commission will also be assessing advisors cybersecurity procedures during exams it conducts this year.
Meanwhile, the House Committee on Homeland Security unanimously approved on Wednesday H.R. 3696, the National Cybersecurity and Critical Infrastructure Protection Act of 2013.
The bill was sent to the full House for consideration.
The committee said in a statement that the Act “addresses the cyber threat by giving the Department of Homeland Security (DHS) the tools to secure our nation in cyberspace, while protecting privacy and civil liberties and prohibiting any new regulations at DHS.”
Check out House Committee OKs Cybersecurity Bill on ThinkAdvisor.