NASAA RELEASES ANNUAL REPORT ON STATE-REGISTERED INVESTMENT ADVISERS

State securities regulators are concerned that deficiencies related to cybersecurity are rising among state-registered investment advisers in examinations by state securities examiners.

Top 5 Deficiency - “No or inadequate cybersecurity insurance” - Click Here to Get a Cyber Insurance Quote from Advisor Armor

In their examinations of state-registered investment advisers in 41 U.S. jurisdictions between January and June 2019, state examiners found deficiencies relating to cybersecurity in more than one-quarter (26%) of their examinations, up from 23% during the last series of coordinated examinations in 2017.

The top five cybersecurity-related deficiencies included: no testing of cybersecurity vulnerability, lack of procedures regarding securing or limiting access to devices, lack of procedures related to internet connectivity, weak or infrequently changed passwords, and no or inadequate cybersecurity insurance.

Cybersecurity is a priority for state securities examiners. Smaller companies are the low hanging fruit for cybercriminals, and when you consider that more than three-fourths of the nearly 18,000 state- registered investment advisers are 1- to 2-person shops, it is clear how important cybersecurity should be for these small businesses as well.

NASAA encourages state-registered investment advisers to review their cybersecurity practices to ensure compliance, and to take advantage of the free cybersecurity checklist offered by NASAA to help gauge their cybersecurity preparedness.

The NASAA Cybersecurity Checklist for Investment Advisers includes 89 assessment areas to help state- registered investment advisers identify, protect, and detect cybersecurity vulnerabilities; and to respond to and recover from cyber events.

Overall, the incidence of deficiencies in just about every category except cybersecurity has decreased since 2015.

The examination report and cybersecurity checklist are available on the Investment Adviser section of the NASAA website at www.nasaa.org/industry-resources/ investment-advisers.