Think Advisor Archives - workplace

Centennial State Sets Cybersecurity Example

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New regulations in Colorado set ‘commodity security’ apart from robust cybersecurity practices

Justin Kapahi, vice president of solutions and security at Workplace, is excited about a new set of cybersecurity regulations for financial institutions that were recently passed in Colorado.

The Colorado Division of Securities published final rules in mid-May that compel broker-dealers and investment advisors to establish and maintain written cybersecurity procedures designed to protect clients’ personal confidential information. Those procedures include using secure emails that employ encryption and multifactor authentication practices for employees to access databases, among other things.

Kapahi believes these rules will go a long way toward helping financial advisory firms in Colorado understand how best to protect themselves from hackers. Even if most firms in this industry have in place what Kapahi calls “commodity security” (firewalls and anti-virus protection, for example), many are not truly equipped to counter “socially engineered threats” like spam emails that look innocuous but can result in major database breaches.

How Wealth Managers Can Identify the Right Cloud Technology

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Although cloud computing is fast becoming the norm in IT, many people still have trouble defining “the cloud.” Even among IT experts, the term “cloud” can refer to a wide variety of different technologies that are only connected in a general sense.

This confusion makes it hard for wealth managers to know whether the cloud is secure enough to support their firms’ critical information and workflows. The answer to this question isn’t so much “yes” as “yes, it can be.” Not all clouds are created equal, especially when it comes to management and infrastructure. In order to experience the full benefits of the cloud, wealth managers need to understand which type of cloud solution is the right fit for their practice before they begin the transition process.

Hacked? Proposed Bill Would Allow Firms to Hack Back

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House proposes bill amendment that would allow retaliatory hacking

Rep. Tom Graves, R-Ga., introduced a bill as a discussion draft that would allow a victim of a cyberattack to access the attacker’s computer in order to gather information about the attack to share with law enforcement or to stop the hacker from continuing to access their network.

The Active Cyber Defense Certainty Act would not allow cyberattack victims to destroy any information on their attacker’s network or to otherwise cause a threat to public safety. The proposed amendment has not been formally introduced yet.

“This bill is about empowering individuals to defend themselves online, just as they have the legal authority to do during a physical assault,” Graves said in a statement on Friday announcing the proposal. “While the bill doesn’t solve every problem, it’s an important first step. I hope my bill helps individuals defend themselves against cybercriminals while igniting a conversation that leads to more ideas and solutions that address this growing threat.”

Conversation is all that Justin Kapahi, vice president of solutions and security for Workplace, expects to come from the proposed bill. He told ThinkAdvisor on Wednesday that the proposal was likely “meant to provoke discussion” rather than to actually become law.

“It’s good to create a discussion around ‘why do we have to play defense? Why can’t we play offense?’” he said. Ultimately, though, he said advisors could take the proposal as “entertainment,” and to continue focusing their cybersecurity efforts on what regulators are looking for now.

He pointed out that most breaches are from users inadvertently giving their passwords to hackers. He recommended financial firms strengthen their cybersecurity programs with training and two-factor authentication.

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Deadline Approaching for New York Cybersecurity Regulations

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Rules ‘go beyond’ what SEC, FINRA have required of financial firms

Gov. Andrew Cuomo of New York announced Thursday final regulations that require financial services institutions to establish and maintain strict cybersecurity standards and to report them to the state’s Department of Financial Services.

DFS first proposed the regulation in September and was met with strong opposition from industry groups that said it was too strict. The mandate was revised in December to push back the compliance date. The regulation will take effect on March 1, and financial firms in New York will have until Sept. 1 to comply.

“New York is the financial capital of the world, and it is critical that we do everything in our power to protect consumers and our financial system from the ever increasing threat of cyberattacks,” Cuomo said in a statement. “These strong, first-in-the-nation protections will help ensure this industry has the necessary safeguards in place in order to protect themselves and the New Yorkers they serve from the serious economic harm caused by these devastating cybercrimes.”

Indeed, the mandate prescribed by the New York DFS “goes beyond even what the SEC and FINRA have put forth,” according to John Cunningham, chief information officer and chief information security officer for Docupace.

Financial firms are being asked to “open the kimono” on their cybersecurity practices and report annually to the state superintendent on gaps in their firms and what they’re doing to remediate them, he said. Those reports must be retained for five years, Cunningham said in an interview with ThinkAdvisor. Cybersecurity programs must also include policies for regularly disposing of nonpublic information it no longer needs.

Firms must report all cybersecurity events, even unsuccessful ones, within 72 hours of discovery, he added.

Justin Kapahi, vice president of solutions and security at Workplace, called the mandate “one of the more prescriptive action summaries I’ve seen in a while.”

“Right off the bat, you see that much more prescriptive about the kind of IT policies you have to have, exactly what should make up those IT policies, and how you’re supposed to use those policies to measure your risk. That’s something that the SEC infers, but [the New York DFS] actually prescribes,” Kapahi told ThinkAdvisor.

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Your Biggest Cybersecurity Threat? Your Employees

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Corporate security breaches are becoming ever more common each year, and firms ranging from the highest echelons of the Fortune 500 roster to small RIAs have proven vulnerable.

Frequent headlines of hacks and data leakages are increasingly hard to ignore. Many financial advisors have seen those stories and sought a better understanding of cybersecurity. It’s an encouraging sign that wealth management firms of all sizes are making the concept central to their value proposition.

By now you’ve probably heard about the most obvious cybersecurity precautions – cloud-based platforms that facilitate firewalls, data encryption and multi-factor authentication. But many firms have still not come to grips with one of the most prevalent sources of data breaches: employees.

Hackers routinely target workers who are dangerously oblivious to proper cybersecurity practices. Managers who care about protecting their clients, their firms and themselves must prioritize educating employees of all levels on how breaches occur.

Employee-Related Breaches

Whether rank-and-file or C-suite, employees can fall prey to malicious agents in numerous ways. Typical scenarios involve social engineering, insecure remote access and unauthorized access.

  • Social engineering involves criminals who use emails, text messages, phone calls and websites to impersonate legitimate sources. They then dupe staffers into revealing confidential information or clicking links that hijack the firm’s operating system.
  • Insecure remote access is rampant. Hackers can easily infiltrate systems that use public wifi such as that available at libraries, parks or coffee shops. Similarly, employees who share laptops or smartphones with anyone else puts private data at risk.
  • Unauthorized access is when staffers use applications to view files or change data they should not be able to touch. This usually requires another employee, such as a system administrator, to be lax with system access controls. Data theft or destruction can follow.

Employees have been responsible for data breaches in both the private and public sectors.

In June, the Securities and Exchange Commission fined Morgan Stanley $1 million after a former advisor accessed confidential data on thousands of clients belonging to other advisors, and transferred them to his personal server, only for him to become the victim of a hacker who then posted some of the data online.

And in July, Republican members of the House Committee on Science, Space and Technology released a report criticizing the Federal Deposit Insurance Corporation for failing to prevent employees of the agency from storing private data about banks and individuals on unauthorized portable drives – on several occasions.

Preparing Employees

Any RIA without a rigorous cybersecurity employee-training program should fix that oversight immediately. Executives should announce the program in writing, to foster clarity. The message should highlight steps everyone can take now to improve cybersecurity:

  • Passwords should be long enough and intricate enough to incorporate letters, numbers, symbols, upper case and lower case characters. Employees should vary passwords across applications, and avoid using sentimental clues like birthdays or family names that hackers might guess.
  • Staff should log onto the firm’s servers only from approved locations such as the office or home, and only from devices either provided by the firm or that belong solely to the staffer.
  • If unverified sources seek firm data, electronically or otherwise, workers should alert their supervisor before doing anything else.

Effective employee-training programs are ongoing endeavors characterized by structure and buy-in at all levels. The best way to prevent data breaches is to implement written policies and procedures addressing how to handle digital information, software usage and user access. Firms should implement strict controls on which employees can access specific applications, including whether an individual employee can only read certain files or also edit them. In order to do so, operating systems must be able to automatically track all user activity and produce regular audit logs that managers review.

Proper training includes scenario analysis. What if a hacker obtains a client’s social security number? What if an advisor loses an office-supplied smartphone or laptop? What if the firm’s data encryption, firewall and multi-factor authentication tools are outdated? What if a staffer is suspicious of a colleague’s activities on the operating system?

All employees must know how to respond in each scenario, based on their specific role at the firm and their place in the chain of command. That’s why training guidelines should be written, tailored for relevant positions, and stored in easily accessible places. Furthermore, qualified cybersecurity professionals should be available to answer staff questions or help conduct training.

Delay No Longer

Yes, it is a major commitment to upgrade your firm’s cybersecurity precautions to account for employee-related vulnerabilities. RIAs must research the most appropriate software to use and the technology partners best suited to provide educational resources. As firms increasingly rely on technology, the potential for data breaches will also increase. Therefore, the wisest course of action is to prepare now for tomorrow’s security risks.

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