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What Is FINRA and How Does it Handle Cybersecurity?

It has become increasingly important for financial institutions to adopt robust security measures to safeguard their client’s assets and personal data. To address this challenge, FINDA has established a comprehensive set of rules to enhance its member firms’ cybersecurity posture.

However, there isn’t a set-in-stone framework for specific security measures. Instead, FINRA consists of obligations and guidance on how to address those obligations.

This article will delve into the various aspects of cybersecurity related to FINRA. By understanding the importance of cybersecurity within the context of FINRA’s regulatory framework, financial institutions can better protect their clients, mitigate risks, and contribute to a more secure and resilient financial system.

What Is the Financial Industry Regulatory Authority (FINRA)?

The Financial Industry Regulatory Authority is a non-governmental organization in the U.S. that oversees brokerage firms and representatives. It aims to protect investors by ensuring the securities industry operates fairly and honestly.

FINRA cybersecurity refers to the policies, guidelines, and best practices established by FINRA to help member firms protect their information systems and customer data from cyber threats. These guidelines focus on risk management, data protection, and technology controls that firms must implement to prevent, detect, and respond to cybersecurity threats.

 

FINRA and Governance Rules

While FINRA will need expert organizations to address specific security issues around the threats listed, there isn’t a particular standard of compliance in place. Instead, several regulatory obligations exist that are managed and enforced by FINRA through their relationship with the Securities Exchange Commission (SEC). 

Note that these requirements play a role in security but touch on other significant areas like fighting fraud, money laundering, and terrorism.

These obligations are split into different rules. Some of FINRA rules that are notable for security include:

Additionally, the processes that fall under these requirements will subsequently fall under Rule 30 of SEC Regulation S-P, also known as the Safeguards Rule, which requires registered broker-dealers, investment companies, and investment advisers to adopt written policies and procedures designed to protect their customers’ nonpublic personal information.

 

FINRA and Security Threats

 

 

These rules touch on important cybersecurity obligations–authentication and identity management, data protection, encryption, mitigation, and recovery, etc. 

While FINRA doesn’t define a specific framework of security for firms that guides them in addressing these issues, it does define a select list of governance considerations that firms should understand.

These considerations include:

Additionally, it also outlines a significant set of attacks that brokers should be aware of and prepared to address. These include:

 

Get Square with FINRA and Cybersecurity with Continuum GRC

If you are a financial institution or brokerage firm, FINRA is non-negotiable. It’s critical that you have a solution that can help you manage and keep up with compliance obligations. Continuum GRC does this, with a risk- and compliance-focused solution that also includes modules for the FINRA SEC Cybersecurity Report Card and Small Firm Cybersecurity Checklist.

Continuum GRC is a cloud platform that can take something as routine and necessary as regular vulnerability scanning and reporting under FedRAMP and make it an easy and timely part of business in the public sector. We provide risk management and compliance support for every major regulation and compliance framework on the market, including:

And more. We are the only FedRAMP and StateRAMP Authorized compliance and risk management solution worldwide.

Continuum GRC is a proactive cyber security® and the only FedRAMP and StateRAMP Authorized cybersecurity audit platform worldwide. Call 1-888-896-6207 to discuss your organization’s cybersecurity needs and find out how we can help your organization protect its systems and ensure compliance.

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