The Newest Fans Of Cybersecurity Investing

What problems keep the leader of the world’s largest mutual fund family up at night?

According to Tim Buckley, the incoming CEO at Vanguard, there’s one concern above all others: Cybersecurity and the chance of getting hacked.

With $4.7 trillion in assets and millions of account holders, no doubt the company is a juicy target. As Buckley told an investment conference recently: “It is front of mind all the time. It’s a huge investment for us. You have to make sure you have defense in depth, making sure you have a strong perimeter.”

And no wonder, since cybersecurity is about to become an even bigger consideration for nearly every firm that handles investment dollars for clients…

Cybersecurity is about to become an even bigger consideration for nearly every firm that handles investment dollars for clients…

The Cyber Threat

Earlier this year, the Securities and Exchange Commission (SEC) said it would make cybersecurity part of its oversight as it reviews procedures and controls of investment advisers and broker-dealers. A few months ago, the agency went a step further and announced the creation of a new “Cyber Unit.”

You might ask why the SEC would do such a thing? Isn’t that better left to the FBI?

But as the capabilities of hackers grow, their crimes are crossing over jurisdictional boundaries, including…

  • Hacking to obtain material nonpublic information.
  • Misconduct perpetrated using the so-called “dark web.”
  • Intrusions into retail brokerage accounts.
  • Cyber-related threats to trading platforms and other critical electronic market infrastructure.
  • Violations involving “distributed ledger technology” (e.g., bitcoin) and initial coin offerings.

“Shocked, Shocked!” About Cybersecurity Fraud

For instance, late last year the SEC charged three hackers with planting malware on the computer networks of two prominent New York law firms that do a lot of business with firms on Wall Street. The malware allowed the hackers to hear so-called nonpublic information, and trade on that knowledge ahead of other investors.

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