SEC Prosecutes BD/RIA for Failing to Require Anti-Virus Software
A registered broker-dealer and investment adviser agreed to a cease-and-desist order and fine for violating Regulation S-P for failing to require registered representatives to maintain anti-virus software. The Respondent operates an independent contractor model with 1,600 independent registered representatives and over 1,000 branches. According to the SEC, a hacker used a malware/keystroke logger virus to access a Rep’s computer, obtain login credential to the firm’s trading system, and access customer information. According to the SEC, the firm’s IT department knew that registered representatives sometimes had security and anti-virus problems but failed to follow up.
OUR TAKE: While this case focuses on Regulation S-P, this case is really another in a line of actions where the SEC implicitly criticizes the independent broker-dealer model that allows independent contractor registered representatives to operate under a loose supervisory umbrella.
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