The Securities and Exchange Commission’s creation of its Cyber Unit coupled with an uptick in exams and the relentless onslaught of cyber intrusion attempts should put broker-dealers and investment advisors on notice—regulators are training their sites on policies, practices and people.

“I’m aware of exams that are going on by both the SEC and Finra and I think it’s just a matter of time before enforcement referrals are made,” said Brian L. Rubin, a partner with Eversheds Sutherland, which just published a new legal alert: “SEC and States Are Upping Their Cyber Game, Are You Doing the Same?”

As the virulence and prevalence of cyberattacks increase, “regulators at both the federal and state levels are looking to enforce sound cyber hygiene on the front end, and they are increasingly requiring that proactive plans and policies be updated regularly to address rapidly evolving threats,” the report states.

With the creation of the Cyber Unit, the SEC is beefing up its technical expertise and demonstrating that it too will evolve and adapt as cybersecurity threats become more advanced. The agency is making it increasingly clear that it expects those it regulates to up their games as well. 

The unit will function as part of the SEC’s Enforcement Division to target misconduct in six cyber-related priority areas:

• Market manipulation schemes involving false information spread through electronic and social media;

• Hacking to obtain material nonpublic information;

• Violations involving distributed ledger technology and initial coin offerings;

• Misconduct perpetrated using the dark web;

• Intrusions into retail brokerage accounts; and 

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