FINRA Compliance Audit

As important as cybersecurity is for anyone operating in the modern business world, it’s especially crucial for banks and other financial institutions. Your data and your assets are simply more valuable than those of organizations in other industries.

That’s why cyber-attacks are 300 times more likely to occur against a financial institution or financial services firm than they are a different type of business. Facing those kinds of odds, you can see why your cybersecurity is so important. Without the right defense, you’ll have to pay a steep cost – FINRA fines.

Monterey IT Services Company Helping Business Follow FINRA Cybersecurity Guidelines

The Reality Of FINRA Compliance

FINRA regulates trading in equities, corporate bonds, securities futures, and options. All firms dealing in securities that are not regulated by another SRO, such as by the Municipal Securities Rulemaking Board (MSRB), are required to be member firms of the FINRA.

As an organization subject to FINRA, you have three primary requirements:

1. Data Encryption

In layman’s terms, encrypted data is formatted in a secret code that would be meaningless if intercepted. It is one of the most efficient ways to secure a database given that decryption can only occur through a key, which is essentially a “secret password”. In this case, there is a need for updated encryption software to make sure that private information is only accessible through the database program.

2. Cybersecurity Monitoring & Management

You need a team and a range of proven processes and using carefully implemented technologies that gather and analyze user reports and a range of data sources – such as logs — from information systems and cybersecurity controls.

You need to identify, address and eliminate cybersecurity events that could negatively impact an organization’s information systems or data. Depending on a number of factors – size, budget, location, etc. — your team can vary from organization to organization and are implemented per structural cybersecurity priorities and risk tolerance.

Whereas one business’ cybersecurity and IT team will oversee a cybersecurity event from detection to remediation, another may instead focus on supporting and coordinating incident responders and handling incident response communication, which could mean status updates and third-party communication.

3. Firewalls And Cybersecurity Solutions

Your firewall is your first line of defense for keeping your information safe. A firewall is a particular type of solution that maintains the security of your network. It blocks unauthorized users from gaining access to your data. Firewalls are deployed via hardware, software, or a combination of the two.

Antivirus software is used in conjunction with a firewall to provide defense against malware, adware, and spyware. Each of these cybercriminal tactics has the potential to do immense damage to internal processes and a company’s reputation. The job of antivirus software is to spot, block, and isolate intrusive, malicious applications so they can’t do damage to your data and legitimate software.

Antivirus is installed to protect at the user level, known as endpoint protection, and is designed to detect and block a virus or malware from taking root on a user’s computer, or worse, accessing a network to which the user is connected.

Do You Meet FINRA’s Requirements?

Do you have each of those above-listed requirements taken care of?

FINRA will find out using CARDS (the Comprehensive Automated Risk Data System), which compiles trading data from approximately 4,000 brokerages and their subsequent 110 million investor accounts. This system automates the collection of this data and analyses it to identify instances of fraud.

That means that you don’t even need to draw the attention of someone in FINRA – your data is enough to incriminate you. And if you’re found to be noncompliant, you could easily face a fine of between $1 – $2 million.

Make Sure You’re FINRA Compliant

If you’re unsure about your compliance, make sure to at least start with these five key steps:

1. Stay Up To Date On FINRA & SEC Guidance Changes

FINRA & SEC periodically release guidance letters that bring awareness to investment firms regarding cybersecurity practices, and the retention and transmission of data. These letters are typically precursors to final regulations, so you have to be careful and make sure you are keeping up with them.

2. Perform Regular Network Assessments

Regulators want to know if you’ve assessed your IT network to make sure it promotes compliance. You need to make sure that you, or whatever third parties you’re working with, have the capabilities to identify and manage the risk of data breaches and protect your investors’ confidential information.

3. Secure Your Data & Transmissions

Securing the digital communication between employees and your clients such as financial transactions, statements, and reconciliations are vital. Regulators want to know how your firm captures, retains and secures business communication between you and your investors, and who’s in charge of the actual supervision and monitoring.

4. Monitor The Security Of Your Digital Information

Do you have the knowledge to make sure your data is secure? This is an area where confidence is key. Regulators want to know how you protect your clients’ data both in storage and in transit.

5. Implement A Cybersecurity Policy

How often is your cybersecurity policy reviewed, updated, and reported on for accuracy with applicable regulations? Does your written policy align with the actual way you supervise the security of digital information? What corrective-action measures are in place for infractions?

Your cybersecurity policy should act as a framework for protecting IT assets. It should be clear and define:

  • Risk-mitigation measures.
  • Enforcement strategies and the consequences for violating policies.
  • A schedule of internal IT compliance reviews and assessments.

Establishing a formalized cybersecurity policy can reduce the risk of unsanctioned or potentially damaging inbound/ outbound communications, and instances that may draw unwanted attention to your firm from regulators.

Make Sure You’re Compliant With A FINRA Audit

Deveera will audit your FINRA compliance to make sure you’re not overlooking anything and risking severe fines. In the course of our audit, we’ll make sure that…

  • Your data is backed up and stored for optimal integrity and reporting
  • Your staff is trained to properly follow FINRA stipulations
  • Your systems are protected by FINRA-recommended cybersecurity measures

Deveera will help you figure out precisely what you don’t know, carrying out robust compliance auditing and recommending best practices and proven solutions to address any vulnerabilities that could put you at risk.

Like this article? Check out the following blogs to learn more:

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