Crowdfunding Portals Beware!

Because 88% of SEC tested broker-dealers and 74% of investment advisers have experienced cyber attacks, the head of the Securities and Exchange Commission’s Division of Enforcement is telling financial institutions that a cyber breach may also result in a violation of SEC rules (i.e., Regulation SP).

Reg. SP requires financial institutions to provide its clients with its privacy policy and to protect clients from the disclosure of their confidential personal information maintained on the institution’s servers.

Failure to do even the basics, like encrypting client’s data, may bring civil penalties.

While crowdfunding portals are generally not covered by the regulation, because they typically store information about a person’s accredited status, they should take similar precautions to protect their customers.

About JeffKoeppel

I am a corporate/securities attorney in the Washington, DC area. Prior to joining the firm, I was a Senior Attorney Advisor in the Division of Corporation Finance at the U.S. Securities and Exchange Commission. I am a member of the Bars of the States of Maryland, New York and the District of Columbia. You can also follow this blog on LinkedIn at:
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