May 4, 2023
Who may be interested: Registered Investment Advisers, Broker-Dealers.
Quick Take: The SEC’s Division of Examinations staff (Staff) recently issued a risk alert (Alert) highlighting deficiencies and trends that the Staff have observed relating to the safeguarding of customer records and information at branch offices of registered investment advisers and broker-dealers (collectively, firms). The Alert follows recent proposed rule amendments that would require firms to adhere to enhanced compliance requirements relating to sensitive customer information.
Under the Safeguards Rule of Regulation S-P, firms are required to adopt and implement policies and procedures reasonably designed to ensure the security, integrity and confidentiality of customer records and information, and to prevent unauthorized access to, or use of, customer records and information that could result in substantial harm or inconvenience to a customer.
In the Alert, the Staff noted that many firms may be out of compliance with the Safeguards Rule. The Staff observed a trend in which many firms have policies and procedures in place for safeguarding customer records and information at their main offices but failed to implement those policies in branch offices. The Staff highlighted several key areas in which they observed deficiencies, including:
The Staff encouraged firms to consider their entire organization, including branch offices, when implementing policies and procedures for safeguarding customer records and information to ensure compliance with Regulation S-P.
The Alert is available here.
For a discussion of investment advisers’ duties to protect client information, see “Privacy and Cybersecurity: How Advisers Must Protect their Clients’ Most Valuable Asset”
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The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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