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By the Office of Compliance Inspections and Examinations1

Volume IV, Issue 2 April 15, 2014 

OCIE CYBERSECURITY INITIATIVE

I. Introduction

The U.S. Securities and Exchange Commission’s Office of 

Compliance Inspections and Examinations (OCIE) previously 

announced that its 2014 Examination Priorities included a focus on 

technology, including cybersecurity preparedness.2 OCIE is issuing 

this Risk Alert to provide additional information concerning its 

initiative to assess cybersecurity preparedness in the securities 

industry.

II. Background

On March 26, 2014, the SEC sponsored a Cybersecurity 

Roundtable. In opening the Roundtable, Chair Mary Jo White 

underscored the importance of this area to the integrity of our 

market system and customer data protection. Chair White also 

emphasized the “compelling need for stronger partnerships between 

the government and private sector” to address cyber threats.3 Commissioner Aguilar, who 

recommended holding a Cybersecurity Roundtable, emphasized the importance for the 

Commission to gather information and “consider what additional steps the Commission should 

take to address cyber-threats.”4

 1

 The statements and views expressed herein are those of the staff of OCIE. This guidance is not a rule, 

regulation, or statement of the Commission. The Commission has expressed no view on its contents. This 

document was prepared by the SEC staff and is not legal advice.

2 Examination Priorities for 2014, available at: http://www.sec.gov/about/offices/ocie/national-examinationprogram-priorities-2014.pdf.

3 Chair Mary Jo White, “Opening Statement at SEC Roundtable on Cybersecurity” (March 26, 2014), 

available at: http://www.sec.gov/News/PublicStmt/Detail/PublicStmt/1370541286468. 

4 Commissioner Luis A. Aguilar, “The Commission’s Role in Addressing the Growing Cyber-Threat,” 

Statement at SEC Roundtable on Cybersecurity (March 26, 2014), available at: 

http://www.sec.gov/News/PublicStmt/Detail/PublicStmt/1370541287184.

Topic: Cybersecurity

Examinations

Key Takeaways: OCIE will be 

conducting examinations of more 

than 50 registered brokerdealers and registered 

investment advisers, focusing on 

areas related to cybersecurity. 

In order to empower compliance 

professionals with questions and 

tools they can use to assess their 

respective firms’ cybersecurity 

preparedness, OCIE has included 

a sample cybersecurity document

request in the Appendix to this 

Risk Alert.
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III. Examinations

OCIE’s cybersecurity initiative is designed to assess cybersecurity preparedness in the securities 

industry and to obtain information about the industry’s recent experiences with certain types of 

cyber threats. As part of this initiative, OCIE will conduct examinations of more than 50 

registered broker-dealers and registered investment advisers focused on the following: the 

entity’s cybersecurity governance, identification and assessment of cybersecurity risks, 

protection of networks and information, risks associated with remote customer access and funds 

transfer requests, risks associated with vendors and other third parties, detection of unauthorized 

activity, and experiences with certain cybersecurity threats. 

As part of OCIE’s efforts to promote compliance and to share with the industry where it sees 

risk, OCIE is including, as the Appendix to this Risk Alert, a sample request for information and 

documents used in this initiative. 

IV. Conclusion

These examinations will help identify areas where the Commission and the industry can work 

together to protect investors and our capital markets from cybersecurity threats. The sample 

document request (see Appendix) is intended to empower compliance professionals in the 

industry with questions and tools they can use to assess their firms’ level of preparedness, 

regardless of whether they are included in OCIE’s examinations.

This Risk Alert is intended to highlight for firms risks and issues that the staff has identified. In addition, this Risk 

Alert describes factors that firms may consider to (i) assess their supervisory, compliance and/or other risk 

management systems related to these risks, and (ii) make any changes, as may be appropriate, to address or 

strengthen such systems. These factors are not exhaustive, nor will they constitute a safe harbor. Other factors 

besides those described in this Risk Alert may be appropriate to consider, and some of the factors may not be 

applicable to a particular firm’s business. While some of the factors discussed in this Risk Alert reflect existing 

regulatory requirements, they are not intended to alter such requirements. Moreover, future changes in laws or 

regulations may supersede some of the factors or issues raised here. The adequacy of supervisory, compliance,

and other risk management systems can be determined only with reference to the profile of each specific firm 

and other facts and circumstances.
APPENDIX

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

OFFICE OF COMPLIANCE INSPECTIONS AND EXAMINATIONS

100 F STREET, NE

WASHINGTON, DC 20549

April 15, 2014

This document1 provides a sample list of requests for information that the U.S. Securities and Exchange 

Commission’s Office of Compliance Inspections and Examinations (OCIE) may use in conducting 

examinations of registered entities regarding cybersecurity matters. Some of the questions track 

information outlined in the “Framework for Improving Critical Infrastructure Cybersecurity,”2 released 

on February 12, 2014 by the National Institute of Standards and Technology. OCIE has published this 

document as a resource for registered entities. This document should not be considered all inclusive of the 

information that OCIE may request. Accordingly, OCIE will alter its requests for information as it 

considers the specific circumstances presented by each firm’s particular systems or information technology 

environment. 

Identification of Risks/Cybersecurity Governance

1. For each of the following practices employed by the Firm for management of information security 

assets, please provide the month and year in which the noted action was last taken; the frequency 

with which such practices are conducted; the group with responsibility for conducting the practice;

and, if not conducted firmwide, the areas that are included within the practice. Please also provide a 

copy of any relevant policies and procedures.

• Physical devices and systems within the Firm are inventoried.

• Software platforms and applications within the Firm are inventoried. 

• Maps of network resources, connections, and data flows (including locations where customer 

data is housed) are created or updated.

• Connections to the Firm’s network from external sources are catalogued.

• Resources (hardware, data, and software) are prioritized for protection based on their sensitivity 

and business value.

• Logging capabilities and practices are assessed for adequacy, appropriate retention, and secure 

maintenance.

 1 The statements and views expressed herein are those of the staff of OCIE. This guidance is not a rule, regulation, or 

statement of the Commission. The Commission has expressed no view on its contents. This document was 

prepared by the SEC staff and is not legal advice. 

2 National Institute of Standards and Technology, “Framework for Improving Critical Infrastructure Cybersecurity,” 

(Feb. 12, 2014), available at: http://www.nist.gov/cyberframework/upload/cybersecurity-framework-021214-

final.pdf.
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2. Please provide a copy of the Firm’s written information security policy. 

3. Please indicate whether the Firm conducts periodic risk assessments to identify cybersecurity threats, 

vulnerabilities, and potential business consequences. If such assessments are conducted:

a. Who (business group/title) conducts them, and in what month and year was the most recent 

assessment completed?

b. Please describe any findings from the most recent risk assessment that were deemed to be 

potentially moderate or high risk and have not yet been fully remediated.

4. Please indicate whether the Firm conducts periodic risk assessments to identify physical security 

threats and vulnerabilities that may bear on cybersecurity. If such assessments are conducted: 

a. Who (business group/title) conducts them, and in what month and year was the most recent 

assessment completed?

b. Please describe any findings from the most recent risk assessment that were deemed to be 

potentially moderate or high risk and have not yet been fully remediated.

5. If cybersecurity roles and responsibilities for the Firm’s workforce and managers have been 

explicitly assigned and communicated, please provide written documentation of these roles and 

responsibilities. If no written documentation exists, please provide a brief description.

6. Please provide a copy of the Firm’s written business continuity of operations plan that addresses 

mitigation of the effects of a cybersecurity incident and/or recovery from such an incident if one 

exists. 

7. Does the Firm have a Chief Information Security Officer or equivalent position? If so, please 

identify the person and title. If not, where does principal responsibility for overseeing cybersecurity 

reside within the Firm?

8. Does the Firm maintain insurance that specifically covers losses and expenses attributable to 

cybersecurity incidents? If so, please briefly describe the nature of the coverage and indicate 

whether the Firm has filed any claims, as well as the nature of the resolution of those claims.

Protection of Firm Networks and Information

9. Please identify any published cybersecurity risk management process standards, such as those issued 

by the National Institute of Standards and Technology (NIST) or the International Organization for 

Standardization (ISO), the Firm has used to model its information security architecture and 

processes.
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10. Please indicate which of the following practices and controls regarding the protection of its networks 

and information are utilized by the Firm, and provide any relevant policies and procedures for each 

item.

• The Firm provides written guidance and periodic training to employees concerning information 

security risks and responsibilities. If the Firm provides such guidance and/or training, please 

provide a copy of any related written materials (e.g., presentations) and identify the dates, topics, 

and which groups of employees participated in each training event conducted since January 1, 

2013.

• The Firm maintains controls to prevent unauthorized escalation of user privileges and lateral 

movement among network resources. If so, please describe the controls, unless fully described 

within policies and procedures.

• The Firm restricts users to those network resources necessary for their business functions. If so, 

please describe those controls, unless fully described within policies and procedures.

• The Firm maintains an environment for testing and development of software and applications 

that is separate from its business environment.

• The Firm maintains a baseline configuration of hardware and software, and users are prevented 

from altering that environment without authorization and an assessment of security implications.

• The Firm has a process to manage IT assets through removal, transfers, and disposition. 

• The Firm has a process for ensuring regular system maintenance, including timely installation of 

software patches that address security vulnerabilities. 

• The Firm’s information security policy and training address removable and mobile media. 

• The Firm maintains controls to secure removable and portable media against malware and data 

leakage. If so, please briefly describe these controls.

• The Firm maintains protection against Distributed Denial of Service (DDoS) attacks for critical 

internet-facing IP addresses. If so, please describe the internet functions protected and who 

provides this protection.

• The Firm maintains a written data destruction policy. 

• The Firm maintains a written cybersecurity incident response policy. If so, please provide a 

copy of the policy and indicate the year in which it was most recently updated. Please also 

indicate whether the Firm conducts tests or exercises to assess its incident response policy, and if 

so, when and by whom the last such test or assessment was conducted.

• The Firm periodically tests the functionality of its backup system. If so, please provide the 

month and year in which the backup system was most recently tested.
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11. Please indicate whether the Firm makes use of encryption. If so, what categories of data, 

communications, and devices are encrypted and under what circumstances?

12. Please indicate whether the Firm conducts periodic audits of compliance with its information 

security policies. If so, in what month and year was the most recent such audit completed, and by 

whom was it conducted?

Risks Associated With Remote Customer Access and Funds Transfer Requests

13. Please indicate whether the Firm provides customers with on-line account access. If so, please 

provide the following information:

a. The name of any third party or parties that manage the service.

b. The functionality for customers on the platform (e.g., balance inquiries, address and contact 

information changes, beneficiary changes, transfers among the customer’s accounts,

withdrawals or other external transfers of funds).

c. How customers are authenticated for on-line account access and transactions. 

d. Any software or other practice employed for detecting anomalous transaction requests that 

may be the result of compromised customer account access.

e. A description of any security measures used to protect customer PINs stored on the sites.

f. Any information given to customers about reducing cybersecurity risks in conducting 

transactions/business with the Firm.

14. Please provide a copy of the Firm’s procedures for verifying the authenticity of email requests 

seeking to transfer customer funds. If no written procedures exist, please describe the process. 

15. Please provide a copy of any Firm policies for addressing responsibility for losses associated with 

attacks or intrusions impacting customers. 

a. Does the Firm offer its customers a security guarantee to protect them against hacking of 

their accounts? If so, please provide a copy of the guarantee if one exists and a brief 

description. 

Risks Associated With Vendors and Other Third Parties

16. If the Firm conducts or requires cybersecurity risk assessments of vendors and business partners with 

access to the Firm’s networks, customer data, or other sensitive information, or due to the 

cybersecurity risk of the outsourced function, please describe who conducts this assessment, when it 

is required, and how it is conducted. If a questionnaire is used, please provide a copy. If assessments 

by independent entities are required, please describe any standards established for such assessments.
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17. If the Firm regularly incorporates requirements relating to cybersecurity risk into its contracts with 

vendors and business partners, please describe these requirements and the circumstances in which 

they are incorporated. Please provide a sample copy.

18. Please provide a copy of policies and procedures and any training materials related to information 

security procedures and responsibilities for trainings conducted since January 2013 for vendors and 

business partners authorized to access its network. 

19. If the Firm assesses the segregation of sensitive network resources from resources accessible to third 

parties, who (business group/title) performs this assessment, and provide a copy of any relevant 

policies and procedures?

20. If vendors, business partners, or other third parties may conduct remote maintenance of the Firm’s 

networks and devices, describe any approval process, logging process, or controls to prevent

unauthorized access, and provide a copy of any relevant policies and procedures.

Detection of Unauthorized Activity

21. For each of the following practices employed by the Firm to assist in detecting unauthorized activity

on its networks and devices, please briefly explain how and by whom (title, department and job 

function) the practice is carried out.

• Identifying and assigning specific responsibilities, by job function, for detecting and reporting 

suspected unauthorized activity.

• Maintaining baseline information about expected events on the Firm’s network.

• Aggregating and correlating event data from multiple sources.

• Establishing written incident alert thresholds.

• Monitoring the Firm’s network environment to detect potential cybersecurity events.

• Monitoring the Firm’s physical environment to detect potential cybersecurity events.

• Using software to detect malicious code on Firm networks and mobile devices.

• Monitoring the activity of third party service providers with access to the Firm’s networks.

• Monitoring for the presence of unauthorized users, devices, connections, and software on the 

Firm’s networks.

• Evaluating remotely-initiated requests for transfers of customer assets to identify anomalous and 

potentially fraudulent requests.
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• Using data loss prevention software.

• Conducting penetration tests and vulnerability scans. If so, please identify the month and year of 

the most recent penetration test and recent vulnerability scan, whether they were conducted by 

Firm employees or third parties, and describe any findings from the most recent risk test and/or 

assessment that were deemed to be potentially moderate or high risk but have not yet been 

addressed.

• Testing the reliability of event detection processes. If so, please identify the month and year of 

the most recent test.

• Using the analysis of events to improve the Firm’s defensive measures and policies.

Other

22. Did the Firm update its written supervisory procedures to reflect the Identity Theft Red Flags Rules, 

which became effective in 2013 (17 CFR § 248—Subpart C—Regulation S-ID)?

a. If not, why?

23. How does the Firm identify relevant best practices regarding cybersecurity for its business model?

24. Since January 1, 2013, has your Firm experienced any of the following types of events? If so, 

please provide a brief summary for each category listed below, identifying the number of such 

incidents (approximations are acceptable when precise numbers are not readily available) and 

describing their significance and any effects on the Firm, its customers, and its vendors or affiliates. 

If the response to any one item includes more than 10 incidents, the respondent may note the number 

of incidents and describe incidents that resulted in losses of more than $5,000, the unauthorized 

access to customer information, or the unavailability of a Firm service for more than 10 minutes. 

The record or description should, at a minimum, include: the extent to which losses were incurred, 

customer information accessed, and Firm services impacted; the date of the incident; the date the 

incident was discovered and the remediation for such incident. 

• Malware was detected on one or more Firm devices. Please identify or describe the malware.

• Access to a Firm web site or network resource was blocked or impaired by a denial of service 

attack. Please identify the service affected, and the nature and length of the impairment.

• The availability of a critical Firm web or network resource was impaired by a software or 

hardware malfunction. Please identify the service affected, the nature and length of the 

impairment, and the cause.

• The Firm’s network was breached by an unauthorized user. Please describe the nature, duration, 

and consequences of the breach, how the Firm learned of it, and how it was remediated.
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• The compromise of a customer’s or vendor’s computer used to remotely access the Firm’s 

network resulted in fraudulent activity, such as efforts to fraudulently transfer funds from a 

customer account or the submission of fraudulent payment requests purportedly on behalf of a 

vendor. 

• The Firm received fraudulent emails, purportedly from customers, seeking to direct transfers of 

customer funds or securities. 

• The Firm was the subject of an extortion attempt by an individual or group threatening to impair 

access to or damage the Firm’s data, devices, network, or web services.

• An employee or other authorized user of the Firm’s network engaged in misconduct resulting in 

the misappropriation of funds, securities, sensitive customer or Firm information, or damage to 

the Firm’s network or data.

25. Since January 1, 2013, if not otherwise reported above, did the Firm, either directly or as a result of 

an incident involving a vendor, experience the theft, loss, unauthorized exposure, or unauthorized 

use of or access to customer information? Please respond affirmatively even if such an incident 

resulted from an accident or negligence, rather than deliberate wrongdoing. If so, please provide a 

brief summary of each incident or a record describing each incident.

26. For each event identified in response to Questions 24 and 25 above, please indicate whether it was 

reported to the following:

• Law enforcement (please identify the entity)

• FinCEN (through the filing of a Suspicious Activity Report)

• FINRA

• A state or federal regulatory agency (please identity the agency and explain the manner of 

reporting)

• An industry or public-private organization facilitating the exchange of information about 

cybersecurity incidents and risks

27. What does the Firm presently consider to be its three most serious cybersecurity risks, and why?

28. Please feel free to provide any other information you believe would be helpful to the Securities and 

Exchange Commission in evaluating the cybersecurity posture of the Firm or the securities industry.