This article was originally published November 16, 2020.

Download the Cybersecurity Checklist by SWK Technologies to learn how to protect your financial services firm and ensure compliance with state, industry and federal regulators. Built with core FINRA and SEC regulations in mind, and with additional requisites supplied by SWK’s experts, the checkable items on this list will allow you to measure if your firm’s protections in place cover the basic needs today. If even one of these requirements is not met, it could reflect significant risk for audits as well as data breaches by both hackers and internal bad actors.
Whether you are a broker-dealer, advisor, insurance provider or deliver any other service for finance management, you will inevitably face an increasingly complex cybersecurity landscape, with evolving regulatory requirements and sophisticated threats. Your business relies on collecting, recording, storing and managing an often vast volume of client data, much of it being highly sensitive and therefore valuable to many different parties – your customers and cybercriminals included. While SWK’s list should not be treated as a comprehensive audit guide, it will help you identify and prepare for the biggest threats to your firm’s success:
Cybersecurity Regulations for Financial Service Firms
The regulatory landscape for financial services cybersecurity has evolved significantly in recent years as old requirements have continued to be expanded and new ones added over the 2020’s. Understanding these changes is key to avoiding costly penalties and enforcing compliance throughout your processes:
SEC Regulation S-P Amendments
The SEC’s amendments to Regulation S-P, effective in 2024, introduce new requirements for incident response and customer notification. Financial institutions must now maintain written incident response programs that include detection, response, and recovery capabilities. When a breach involves customer information, firms must notify affected customers within 30 days and implement enhanced safeguards to prevent future incidents.
State-Level Requirements
New York’s SHIELD Act (Stop Hacks and Improve Electronic Data Security Act) and 23 NYCRR 500 continue to set strict standards for data protection, while other states have introduced similar requirements. The New York Department of Financial Services (NYDFS) has implemented additional cybersecurity requirements that apply to covered entities in recent years as well, including mandating enhanced multifactor authentication (MFA) and annual penetration testing.
Compliance Deadlines and Obligations
Different firm types face different timeline requirements for demonstrating compliance at different levels, varying by size, stage, market and other factors. Larger financial institutions typically have 18-month implementation periods for new requirements, while smaller firms may have up to 24 months. However, certain basic protections and notification procedures have immediate effect, making it essential to assess your current compliance status.
Data Risk Assessment
Any service business in the digital age runs on data, while firms in the financial industry have the added burden of working with some of the most sensitive information in any industry. No client will want to work with you if they do not trust that you can take care of their money, or their own clients’ money, in any capacity – which makes assessing the cyber risks to your data a mission-critical function. This is also why regulators prioritize information security practices as a major compliance factor, and your ability to demonstrate due diligence is often a strict requirement.
Enforcement Actions and Business Impact
Financial institutions that experience data breaches face not only regulatory penalties but also significant reputational damage. Escalating enforcement actions demonstrate that regulators are taking an increasingly aggressive approach to cybersecurity violations in the finance industry, with fines reaching hundreds of thousands of dollars even for firms that self-report incidents. However, the key factor in penalization – as well as for legal action by affected parties – is often the culpability of the accused firm in preventing and/or informing of the breach, with more severe repercussions arising the less you show you prioritized the well-being of your customers.
Third Party and Internal Cyber Threats
While so much of the cyber threat discussion is caught up with external hackers, it can be easy to overlook the very real dangers closer to home. Whether it is through a third-party vendor’s negligence or an internal bad actor’s discreet infiltration, the end result is the same. Your data security plan must include controls for what data is shared and how, and be able to limit the impact of a backdoor breach.
Cybersecurity Training, Tools and Threat Detection
The strength of your firm’s data protections is only as secure as the human factor – every (including your employees, managers, and YOU) potentially owns keys to the kingdom. Everyone can be a target for their level of access, even those with basic permissions. Implementing a cybersecurity training program is a must, as is having the right tools to reduce human error and testing for vulnerabilities regularly.
Data Protection Solutions
There are many solutions that a modern financial service firm can deploy to cybersecure your data, ranging from software to internal policy and to outsourced service. These should be used in conjunction to shore up any weaknesses as best as possibly. For example: a password policy will help employees better stick to practice, while MFA (multi-factor authentication) and encryption programs will stop attackers that slip past.
Employee Security Training
Transparency, visibility and awareness are the biggest factors in quickly identifying actual malicious activity. If your whole team knows who is supposed to do what and where within your network, it is much easier to sniff out when someone is doing otherwise. Your cybersecurity training and user guidelines should be able to cover all of these bases and help employees recognize where either their behavior or that of others represents a risk.
Cyber Threat Detection and Testing
Just with many aspects of business, compliance and technology, cyber threats are always evolving and the steps you took to protect yourself yesterday may not work tomorrow. Your firm must stay up to date on the latest news and education, but you should also commit to regular practices like network penetration testing and vulnerability scanning to get the full measure of your cyber defense.
Incident Response and Business Continuity Plans
COVID-19 security realities, wildfires, hurricanes and many, many data breaches over the past few years have all more than illustrated why every business should have several incident response strategies in place. In financial services, you are also required by FINRA and the SEC to have a business continuity plan (BCP) that enables you to continue providing for your clients ASAP post-event. As a customer-facing entity, you must show that you have prepared for these eventualities and can continue to serve your patrons after a timely recovery period.
Written Incident Response Programs
Under the amended SEC Regulation S-P, financial institutions must maintain comprehensive written incident response programs. These programs must include procedures for detecting cybersecurity incidents, responding to and recovering from incidents, and conducting post-incident analysis. The program must be regularly tested and updated to reflect new threats and regulatory requirements.
Customer and Regulatory Notification
When a cybersecurity incident affects customer information, firms face specific notification requirements. Customers must be notified within 30 days of the incident, and the notification must include details about what information was involved, what steps the firm is taking to respond, and what customers can do to protect themselves. Additionally, firms must report material cybersecurity incidents to regulators within prescribed timeframes.
Documentation and Recovery Protocols
Effective incident response requires detailed documentation of all procedures, decisions, and actions taken during a cybersecurity event. This documentation serves both operational and regulatory purposes, helping firms improve their response capabilities while demonstrating compliance with regulatory requirements. Recovery protocols must be tested regularly to ensure they can restore critical systems and data within acceptable timeframes.
Data Backup and Storage
Backing up your data helps maintain it in the event your system goes down; however, how and where these backups are stored plays a big role in their viability. The frequency can also be a deciding factor in maintaining integrity, as a past manual migration will likely not be completely up to date. Modern solutions that leverage the latest technology provide some additional assistance and automation, with easier transfers and background updates made more accessible.
Disaster Recovery Plan
Recovery goals are an integral part of a well-prepared BCP, and should reflect what you need to get priority resources back online post-disaster. There are many factors that go into restoring your system to full capacity, but the top items should all feed into the ultimate objective of reducing the damages of downtime.
Keeping Up with Financial Services Security Compliance
firm’s cybersecurity stance is that regulatory requirements continue to evolve alongside emerging threats. Financial services firms must maintain vigilance across multiple areas: data protection, employee training, incident response, and business continuity. The intersection of these requirements creates a complex compliance landscape that requires careful navigation.
Download the Cybersecurity Checklist for Financial Services
Financial services require the passing of sensitive data and records to facilitate your role – that makes you vulnerable to all manner of cyber threats and compliance risks. It is better to be safe than sorry, and downloading SWK’s Checklist will help you uncover the gaps that could put everything you work for in danger.
Download the Cybersecurity Checklist here and reach out to SWK Technologies if you have any questions, concerns or immediate security issues to solve.