Defending Against Digital Threats: Are You Prepared For New Cybersecurity Regulations?

Concern about cybersecurity is everywhere, with investors increasingly focused on how safe their data is. It’s something that the Securities and Exchange Commission (SEC) is taking seriously, acknowledging that cyber threats pose a real danger to our financial markets.

In 2022, the SEC proposed comprehensive rules that specifically address cybersecurity risk governance and disclosure requirements for investment advisors. These rules highlight the importance of cybersecurity for financial advisors and serve as a clarion call for the entire industry to prioritize the protection of sensitive client information. With the proposed regulations currently being updated with new requirements for increased transparency, it’s crucial to make sure your practice is ready. 

In an era where technology is deeply interwoven into our financial systems, ensuring the security of investments has become paramount. As advisors navigate the complex landscape of managing assets and providing financial guidance, they must remain vigilant against cyber threats that could compromise their clients’ wealth, data, and trust.

With cybersecurity becoming an absolute necessity, advisors need to be prepared.

The Importance of Cybersecurity to You and Your Clients

As an advisor, you often handle sensitive personal and financial client info, such as bank account details, social security numbers, investment portfolios, and more. A cyber-attack, exposing this information, can cause significant harm to both your clients and your relationships with clients.

Advisors depend on their reputation and the trust they build with clients. Anything that damages that reputation, like a data breach, can cause you to lose existing clients and future opportunities. Demonstrating a commitment to cybersecurity reassures clients that you’re taking data protection seriously.

And cybersecurity incidents don’t only impact on the client side of your business. They can disrupt business operations, resulting in financial losses and downtime that equals missed opportunities, delayed transactions, and potential loss of revenue. If your firm has proprietary investment strategies, financial models, and other intellectual property, a breach could lead to the theft of or unauthorized access to this valuable information. The result? Your competitive advantage could be compromised.

The SEC Requirements

The planned rules, including the new 2023 proposals, will require financial advisors to address potential cybersecurity risks in a variety of ways, including:

  • Implementing written policies and procedures to address potential risks, based on their business operations.
  • Undertaking annual reviews of their policies and procedures to evaluate their effectiveness and identify potential weaknesses.
  • Taking steps to anticipate advanced threats and protect critical client data from harm or loss. 
  • Disclosing cybersecurity practices to clients and providing ongoing updates on material changes to policies and procedures.
  • Immediately disclosing security incidents to the SEC by way of written, electronic notice.

With the new planning, reporting, and notification requirements, the SEC hopes to gain a greater understanding and knowledge of any cybersecurity incidents, whether risks or actual breaches. And with more transparency around potential incidents, the Commission expects to better handle the negative impact on the financial markets.  

Taking Your Practice from Risk to Resilience

While regulatory compliance is vital in the financial industry (with punishment a real risk for those that fail to implement the proper cybersecurity measures), there are more factors that make stringent cybersecurity a necessity. Protecting your clients’ data, preserving your reputation, ensuring business continuity, and safeguarding intellectual property are all reasons you should prioritize it.  

The new regulations are on the horizon. Are you ready?


Cybersecurity Risk Management for Investment Advisers, Registered Investment Companies, and Business Development Companies. – Securities and Exchange Commission (n.d.).

Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through Capital Asset Advisory Services, LLC. dba CG Advisory Services, a registered investment advisor. Capital Asset Advisory Services, LLC., CG Advisory Services, and CG Advisor Network are separate entities from LPL Financial. Registration with the SEC does not imply a certain level of skill or training.

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