Wednesday, May 29, 2019
On May 23, 2019, the United States Securities and Exchange Commission (“SEC”)’s Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert entitled “Safeguarding Customer Records and Information in Network Storage – Use of Third Party Security Features” (the “Risk Alert”). The Risk Alert highlights the risks associated with the storage of customer records and information by broker-dealers and investment advisors on cloud-based storage platforms.
According to the Risk Alert, OCIE identified three principal risk factors associated with cloud-based storage of customer records and information:
Misconfigured Network Storage Solutions – Firms fail to properly utilize or configure the security settings in their cloud-based storage platforms to protect against unauthorized access.
Inadequate Oversight of Vendor-Provided Network Storage Solutions – Firms fail to ensure that security settings on cloud-based storage platforms provided by third-party vendors are configured in accordance with the firms’ internal policies and procedures.
Insufficient Data Classification Policies and Procedures – Firms fail to adequately identify the types of customer data stored on cloud-based storage platforms, leading to lapses in security configurations.
In order to more effectively manage the risks associated with cloud-based storage of customer records and information, the Risk Alert suggests various “effective practices” that broker-dealers and investment advisors should employ, including: implementing targeted policies and procedures to ensure ongoing monitoring of cloud-based platforms; setting and ensuring the implementation of effective security configurations for cloud-based platforms; and actively managing third-party vendors to ensure that customer records and information are secure.
The Risk Alert also notes that failure to protect customer records and infor ..
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