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"Working On ‘Team Cyber’" - Remarks Before the Joint Meeting of the Financial and Banking Information Infrastructure Committee (FBIIC) and the Financial Services Sector Coordinating Council (FSSCC)

Washington D.C.

April 14, 2022

Thank you. It’s good to be with the Financial and Banking Information Infrastructure Committee (FBIIC) as well as the Financial Services Sector Coordinating Council (FSSCC). As is customary, I’d like to note that my remarks are my own, and I’m not speaking on behalf of the Commission or SEC staff.

As some of you may know, I often like to talk about the founding of our nation’s securities laws in the 1930s.

So again, today, I’d like to discuss the ’30s—but this time, I actually mean the1830s.

In 1834, exactly a century before the SEC was established, the Blanc brothers in Bordeaux, France, committed the world’s first hack. The two bankers bribed telegraph operators to tip them off as to the direction the market was headed. Therefore, they gained an information advantage over investors who waited for the information to arrive by mail coach from Paris.

The brothers weren’t convicted for their actions, as France didn’t have a law against the misuse of data networks.[1]The Blancs thus pocketed their francs, point-blank.

You may be wondering what all this has to do with the SEC. Well, I think it’s telling that the world’s firstcybersecurityattack involvedsecurities.

Nearly two hundred years after the Blancs stole information about the securities markets, the financial sector remains a very real target of cyberattacks. What’s more, it’s become increasingly embedded within society’s critical infrastructure.

As the famous bank robber Willie Sutton purportedly once said, regarding why he robbed banks: “Because that’s where the money is.” [2]

The interconnectedness of our networks, the use of predictive data analytics, and the insatiable desire for data are only accelerating. State actors and non-state hackers alike sometimes try to target various entities and businesses. Why? To steal data, intellectual property, or money; lower confidence in our financial system; disrupt economies; or just demonstrate their capabilities. All this puts our financial accounts, savings, and private information at risk.

Cyber incidents, unfortunately, happen a lot. History and any study of human nature tells us they’re going to continue to happen.

Cybersecurity also is central to national security. The war Russia is waging on Ukraine reminds us of the relevance of cybersecurity issues. As President Biden said in a statement in March, “This is a critical moment to accelerate our work to improve domestic cybersecurity and bolster our national resilience.”[3]

Team Cyber

Adopting a heightened posture is a task that requires all of us. Last year, Jen Easterly, Director of the Cybersecurity and Infrastructure Security Agency (CISA), said that “cybersecurity is a team sport.” “Each and every one of us are a member of Team Cyber,” she said.[4]

Folks from the private sector—the folks that many of you in the audience represent—are on Team Cyber’s front lines.

Other government entities, such as the Federal Bureau of Investigation and CISA, captain Team Cyber—but the SEC has an important role to play as well.

We have a key role as the regulator of the nearly-$100 trillion capital markets with regard to SEC registrants—ranging from exchanges and brokers to advisers and public issuers. Cyber relates to each part of our three-part mission: investor protection, facilitating capital formation, and that which is in the middle, promoting fair, orderly, and efficient markets.


Given the SEC’s mission, and the evolving cybersecurity risk landscape, when considering work at the SEC, I think about it in three ways:

  • cyber hygiene and preparedness;
  • cyber incident reporting to the government; and
  • in certain circumstances, disclosure to the public.

Our cybersecurity policy work relates to four groups of entities:

  • SEC registrants in the financial sector, such as broker-dealers, investment companies, registered investment advisers, and other market intermediaries;
  • Public companies;
  • Service providers that work with SEC financial sector registrants but are not necessarily registered with the SEC themselves; and
  • The SEC itself.

Financial Sector SEC Registrants

Let me first turn to three initiatives related to financial sector registrants.

Regulation Systems Compliance and Integrity

First, I believe we have an opportunity to consider freshening up Regulation Systems Compliance and Integrity (Reg SCI).[5]

What is Reg SCI? It’s a rule, adopted in 2014, that covers a subset of large registrants, including stock exchanges, clearinghouses, certain alternative trading systems (ATSs), self-regulatory organizations (SROs) and the like. This financial infrastructure is fundamental for our capital markets. The Consolidated Audit Trail (CAT), as a facility of each of the participant SROs, also is subject to Reg SCI.

The rule helps ensure these large, important entities have sound technology programs, business continuity plans, testing protocols, data backups, and so on. The core goal of Reg SCI has been to reduce the occurrence of systems issues and improve resiliency when they do occur.

A lot has changed, though, in the eight years since the SEC first adopted Reg SCI. Thus, I’ve asked staff how we might broaden and deepen this rule. For example, might we consider applying Reg SCI to other large, significant entities it doesn’t currently cover, such as the largest market-makers and broker-dealers?[6]

To that end, in 2020, the Commission proposed to bring large government-securities trading platforms under the Reg SCI umbrella.[7] At our January Commission meeting, we re-proposed this rule expanding the types of platforms that would become ATSs, which has the potential to expand the number of platforms covered by Reg SCI.[8]

I think there also might be opportunities to deepen Reg SCI in order further to shore up the cyber hygiene of important financial entities, including and beyond our Treasury market.

Funds, Advisers, and Broker-Dealers

In February, the Commission proposed new rules that would require registered investment advisers, registered investment companies, and business development companies to shore up their cybersecurity practices. Broadly speaking, these rules and amendments focus on four areas. It would require investment funds and advisers to:

  • Adopt written plans to address cybersecurity risks;
  • Disclose certain cybersecurity incidents to the public;
  • Report certain cybersecurity incidents to the Commission; and
  • Fulfill certain recordkeeping obligations.[9]

I also have asked staff for recommendations on similar appropriate measures for broker-dealers.

I think such reforms could reduce the risk that these registrants couldn’t maintain critical operational capability during a significant cybersecurity incident.[10] I believe they could give clients and investors better information with which to make decisions, create incentives to improve cyber hygiene, and provide the Commission with more insight into intermediaries’ cyber risks.

Data Privacy

I’ve also asked staff for recommendations around when and how financial registrants should update customers about cyber events—particularly when their personal data may have been accessed.

Congress first addressed this issue in the Gramm-Leach-Bliley Act of 1999. The Commission adopted Regulation S-P in the wake of that law. It requires registered broker-dealers, investment companies, and investment advisers to protect customer records and information.[11] It’s the reason that, to this day, a lot of us receive notices informing us about companies’ privacy policies.

More than two decades since Reg S-P was adopted—an eternity in the cybersecurity world—I think there may be opportunities to modernize and expand this rule. This possibly could include proposing to require breach notifications when a customer’s information is accessed without authorization.

Public Companies

Next, let me turn to public companies’ disclosure with respect to cyber risk and cyber events.

The basic bargain is this: Investors get to decide what risks they wish to take. Companies that are raising money from the public have an obligation to share information with investors on a regular basis.

Disclosure regimes evolve over the decades. Cybersecurity is an emerging risk with which public issuers increasingly must contend.

To this end, in March, the Commission proposed rules that would enhance issuers’ cybersecurity disclosures in two key ways.[12]

First, it would require mandatory, ongoing disclosureson companies’ governance, risk management, and strategy with respect to cybersecurity risks. This would allow investors to assess these risks more effectively. For example, under the proposed rules, companies would disclose information such as:

  • management’s and the board’s role and oversight of cybersecurity risks;
  • whether companies have cybersecurity policies and procedures; and
  • how cybersecurity risks and incidents are likely to impact the company’s financials.

Second, we proposed requiring mandatory, material cybersecurity incident reporting, because such material cybersecurity incidents could affect investors’ decision-making.

A number of issuers already provide cybersecurity risk disclosure to investors. I think companies and investors alike would benefit if this information were presented in a consistent, comparable, and decision-useful manner.

Service Providers

Next, service providers often play critical roles within our financial sector. These service providers go far beyond the cloud. They can include investor reporting systems and providers, middle-office service providers, fund administrators, index providers, custodians, data analytics, trading and order management, and pricing and other data services, among others. Many of these entities may not be registered with the SEC.

I’ve asked staff to consider recommendations around how we can further address cybersecurity risk that comes from service providers.[13]


Finally, to state the obvious, the SEC is not immune to cyberattacks either.

Agency staff continue to work to protect SEC data and information technology, as well as the industry data we need to carry out our mission. This work aligns with the Administration’s efforts to improve the nation’s cybersecurity.

In addition, we continue to evaluate our data footprint and improve our data collection processes so that we collect only the data we need to fulfill our mission.


In conclusion, we’re living in a time of rapid technological changes subject to ever present cybersecurity challenges. These cyber risks have implications for the financial sector, investors, issuers and the economy at large. The SEC has a role to play, along with the rest of Team Cyber.

Nearly two centuries after that first cyber hack, I think we can think about how to protect ourselves against the cybersecurity pitfalls of the ’30s—not the 1830s or the 1930s, but the 2030s.

[1] See Tom Standage, “The crooked timber of humanity” (Oct. 5, 2017), available at

[2] See Federal Bureau of Investigation, “Willie Sutton,” available at

[3] See The White House, “Statement by President Biden on Our Nation’s Cybersecurity” (Mar. 21, 2022), available at

[4] See Jen Easterly, “Cybersummit 2021 Keynote Address” (Oct. 6, 2021), available at (see 3:32).

[5] See Securities and Exchange Commission Division of Trading and Markets, “Spotlight on Regulation SCI,” available at

[6] In fact, several commenters back in 2014 suggested that we might consider adding Reg SCI requirements to other entities, including security-based swap data repositories, security-based swaps execution facilities, and non-ATS broker-dealers., p. 72363-54.

[7] See Securities and Exchange Commission, “SEC Proposes Amendments to Include Significant Treasury Markets Platforms Within Regulation ATS” (Jan. 26, 2022), available at

[8] See Securities and Exchange Commission “Statement on Government Securities Alternative Trading Systems” (Jan. 26, 2022), available at

[9] See Securities and Exchange Commission, “Cybersecurity Risk Management for Investment Advisers, Registered Investment Companies, and Business Development Companies” (Feb. 9, 2022), available at See Securities and Exchange Commission, “Statement on Cybersecurity Reforms in the Investment Management Industry” (Feb. 9, 2022), available at

[10] Broker-dealers that are Financial Industry Regulatory Authority (FINRA) members have business continuity plan obligations under FINRA. See “4370. Business Continuity Plans and Emergency Contact Information, available at

[11] See “Regulation S-P,” available at

[12] See Securities and Exchange Commission, “Statement on Proposal for Mandatory Cybersecurity Disclosures” (Mar. 9, 2022), available at

[13] While focused on the most critical systems, eight years ago, the SEC addressed third-party relationships in adopting Reg SCI. SCI entities are “responsible for having in place processes and requirements to ensure that it is able to satisfy the requirements of Regulation SCI for systems operated on behalf of the SCI entity by a third party for certain financial sector entities.” See Regulation Systems Compliance and Integrity, p. 72276.

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