Investors, beware. If your broker-dealer suffers a cyberbreach, any losses you suffer may not be covered.
Not all firms are prepared to deal with or pay for a cyber-related incident that could cause investor losses, according to a risk alert issued by the Securities and Exchange Commission earlier this week.
The caution came after an SEC report that examined 57 registered broker-dealers and 49 registered investment advisors revealed that only 15 percent of broker-dealers and 9 percent of advisors offered security guarantees to protect their clients against cyber-related losses.
What's more, while having cybersecurity insurance is considered a best practice for broker-dealers, it is not legally required. Of the broker-dealers examined, 58 percent had insurance for cyberincidents. However, only 21 percent of advisors maintained cyber-specific coverage.
"Broker-dealers fall on the lower end of the spectrum when it comes to having the necessary cyberprecautions in place" compared to many other financial institutions, said Joe Loomis, CEO of security firm CyberSponse.