On May 16, 2024, the U.S. Securities and Exchange Commission announced the adoption of amendments to Regulation S-P that were proposed last year. The Final Amendments impose enhanced requirements on registered investment advisers, investment companies, broker dealers and transfer agents with respect to handling of consumer financial information.
Regulation S-P
SEC Revisits Regulation S-P After Twenty Years of Innovation to Information Technology
On March 15, 2023, the U.S. Securities and Exchange Commission (“SEC”) released its proposal to amend Regulation S-P: Privacy of Consumer Financial Information and Safeguarding Customer Information (the “Proposed Amendments”), while simultaneously issuing two additional cybersecurity-related rule proposals and re-opening the comment period for its previously proposed cybersecurity risk management…
Cybersecurity: SEC and Other Regulators
In today’s world, cybersecurity breaches and threats are pervasive concerns for any business entity, without exception. Working from home arrangements due to COVID-19 constraints only magnify the risk and create further vulnerabilities for companies. Companies should be aware of (1) the key cyber threats they face, (2) the consequences of…
Broker and Compliance Officer of Broker-Dealer Firm Personally Fined by SEC for Customer Privacy Violations
By Jeffrey Neuburger on
On April 7, 2011, the SEC announced that it had imposed fines of $20,000 each against the former president of a broker-dealer and a former broker for their actions in transferring customer information to a new firm as the defunct firm wound down. The SEC also fined the brokerage firm’s former chief compliance officer $15,000 for compliance failures and security breaches that took place at the defunct firm, some dating back to 2005. Visit our blog to learn more.
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FINRA Fines Member Firm $175,000 for Failure to Protect Confidential Customer Information
By S. Montaye Sigmon on
The Financial Industry Regulatory Authority (FINRA) announced on April 28, 2009 that it had fined Centaurus Financial, Inc., of Anaheim, California, $175,000 for Centaurus’s failure to protect confidential customer information. FINRA also required Centaurus to send notifications to affected customers and their brokers, provide one year of credit monitoring at no cost to the affected customers, and certify to FINRA that its procedures and systems are in compliance with privacy requirements. See FINRA News Release (April 28, 2009).
Feud of the Forms — The Battle of The GLBA Notices
By Proskauer Rose on
The report by Drs. Alan Levy and Manoj Hastak, Consumer Comprehension of Financial Privacy Notices, uses the results of a mall-intercept study to compare the performance of a prototype financial privacy notice developed by the Kleimann Communication Group (“KCG”) during the first phase of the INP against three alternative notices. The Levy-Hastak report, among other things, confirms what proponents of the INP suspected – some GLBA privacy notices are largely ineffective in conveying information to consumers that allows them to make rational decisions about the sharing of their personal financial information.
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SEC Seeks to Better Protect Investors’ Privacy With Proposed Amendments to Regulation S-P
By Scott Carpenter on
In light of growing concerns over identity theft, data breaches, and the hacking of online brokerage accounts, the Securities and Exchange Commission (“SEC”) has recently proposed new amendments to Regulation S-P – the SEC’s existing privacy rules mandated under the Gramm-Leach-Bliley Act. The SEC’s unanimous approval of these proposed rules signals the Commission’s desire to more closely align its privacy guidelines with those of the Federal Trade Commission (“FTC”) and the Federal Banking Agencies, which adopted data breach notice rules in 2005. For regulated companies, however, the amendments could mean additional costs and liabilities.
SEC Ratchets Up Privacy Enforcement Under Regulation S-P
By Proskauer Rose on
Broker-dealer firms are well advised to review and update their privacy policies, in light of the Securities and Exchange Commission’s (“SEC”) recent enforcement and investigation activities arising from Regulation S-P.
According to trade press, recently the SEC informed one independent broker-dealer firm, Next Financial Group, Inc. of Houston, Texas, that it may file a “privacy” suit under Regulation S-P. The suit would be based on the practice, which Next maintains is common among independent broker-dealer firms, of requiring broker recruits from other firms to provide Next with customer information in anticipation of the move. According to the press, the SEC contends that before the brokers left their firms to join Next, they should have asked clients for their consent to use any information at the new firm. Alternatively, Next should have only required brokers to provide this information if the brokers’ prior firms had stated in their privacy policies that departing brokers may take certain customer information to competing firms (and the particular consumers had not opted-out of this policy). The SEC is reportedly considering suing Next for violations of Regulation S-P, as well as for aiding and abetting the violations by the brokers it recruited.