In a recent SEC enforcement action, a registered representative was suspended for 6 months and fined $75,000 for, among other things, forwarding confidential client information from his personal email to a former registered representative who maintained the initial client relationships. The representative also used his personal email to conduct firm business. In some instances, he emailed customer information from his work email to his personal email.
This unfortunate situation shows another side of data security risks that firms must address; the rouge representative who is handling client information in violation of Regulation S-P. In some ways, this type of data breach can be even more difficult to prevent than an external threat.
If someone really wants to get around your system, that person will likely do so. So what to do?
One thing firms should consider is a logging system when an associated person accesses client information subject to Regulation S-P. This way, firm supervisors can monitor who is gaining access to what information, when and how often. The enforcement opinion was silent on any firm protocols in this regard.
Although this type of access-logging system may not have prevented what happened, it could have put the odds in the favor of firm because it may have revealed unusual activity that the firm could have further explored.
The lesson to be learned is that data security is not just an external threat. There are internal risks that must be accounted for in order to have a fulsome data security program.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.