Enforcement Division steps up focus on cyber crimes, protecting retail investors

The SEC on Sept. 26, 2017, announced the formation of a special unit in its Enforcement Division to combat computer-based investment fraud.

At the same, the market regulator is setting up a special task force to prosecute frauds that target retail investors.

The pair of announcements came just days after the agency revealed a major attack on its computer systems that may have been used in some illegal trading. It also came on the eve of a hearing the Senate Banking Committee held with SEC Chairman Jay Clayton. The senators pressured Clayton to be more proactive in fighting cybercrime, and Clayton asked for a bigger technology budget to shore up the agency’s computer systems and security.

The Enforcement Division’s cyber unit will fight against efforts to manipulate the markets through the spread of false information and hacking into computer systems to obtain confidential information that can be used to make trades illegally, such as the assault on the SEC’s systems that it disclosed on Sept. 20. The unit is also being assigned responsibility to investigate abuses using newer technologies like distributed ledger and the so-called dark web, which consists of information beyond the reach of most internet users.

“Cyber-related threats and misconduct are among the greatest risks facing investors and the securities industry,” said Stephanie Avakian, the Enforcement Division’s co-director, in a statement. “The Cyber Unit will enhance our ability to detect and investigate cyber threats through increasing expertise in an area of critical national importance.”

The SEC has been planning the unit for months, and its activities are being coordinated with Clayton’s initiative to strengthen the agency’s cybersecurity efforts.

The SEC’s Retail Strategy Task Force is being set up to look at schemes that target individual investors. The market regulator said it wants the task force to build on the agency’s previous efforts at investor protection.

For more information on this topic, or to learn how Baker Tilly SEC accounting specialists can help, contact our team.

We have partnered with Thomson Reuters to issue our monthly SEC accounting insights. Please feel free to contact Baker Tilly at accounting@bakertilly.com if you have any questions related to these articles or Baker Tilly's Accounting and Assurance Services. © 2017 Thomson Reuters/Tax & Accounting. All Rights Reserved.