FINRA Plans Cybersecurity Exam Sweep

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;
—training programs;
—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