Steps To Prepare Your RIA For The SEC’s Cybersecurity Rules

The SEC's 2025 cybersecurity rule changes are a looming reality. For registered investment advisers (RIAs), this means moving beyond awareness and into action. Protect your RIA and clients with this practical, step-by-step guide that will help you navigate the complexities of the new regulations.

The Evolving Cybersecurity Threat

The SEC's push for stricter cybersecurity rules stems from the escalating frequency and sophistication of cyberattacks. Factors contributing to this heightened risk include:

• increased remote work expanding the attack surface;
• reliance on third-party vendors introducing potential vulnerabilities; and 
• ransomware and data breaches: causing significant financial and reputational damage. 
  

Key Regulatory Changes & Requirements

The new rules, stemming from amendments to Regulation S-P, emphasize several critical areas:

• Mandatory Written Cybersecurity Policies & Procedures:
• RIAs must adopt and implement detailed policies addressing risk assessment, access control, data protection, and incident response.  
• Incident Reporting:
• RIAs are required to report "significant cybersecurity incidents" to the SEC. This necessitates a robust incident detection and reporting system.  
• This includes the assessment of "materiality" of cyber events.
• Annual Review & Reporting:
• Annual reviews of cybersecurity policies and procedures, with documented findings, are mandatory.
• Third-Party Vendor Oversight:
• Due diligence and ongoing monitoring of third-party cybersecurity practices are essential.
• Recordkeeping:
• Expanded recordkeeping requirements.

Practical Steps For RIAs

Step 1: Conduct A Comprehensive Risk Assessment —The Foundation Of Compliance

• What it means: Identify and evaluate potential cybersecurity threats and vulnerabilities within your firm.
• How to do it:
• Inventory all digital assets, including hardware, software, and data.
• Assess the likelihood and impact of various cyberthreats, such as ransomware, phishing, and data breaches.
• Document your findings, and prioritize risks based on their severity.
• Consider using frameworks, like the NIST Cybersecurity Framework.
• Why it's crucial: The SEC requires a risk-based approach to cybersecurity. Your policies and procedures must be tailored to your firm's specific risks.

Step 2: Develop & Implement Robust Written Policies and Procedures —Your Cybersecurity Blueprint

• What it means: Create detailed, documented policies that address all aspects of cybersecurity.
• How to do it:
• Cover key areas, such as access control, data encryption, incident response, and vendor management.
• Ensure that your policies are clear, concise, and easily understood by all employees.
• Regularly review and update policies to reflect evolving threats and regulatory changes.
• Align your policies with the findings of your risk assessment.
• Key areas to cover:
• User Access Control
• Data Encryption & Protection
• Incident Response Plan
• Vendor Management
• Employee Training
• Business Continuity/Disaster Recovery

Step 3: Strengthen Incident Response Capabilities —Prepare For The Inevitable

• What it means: Develop a plan for detecting, responding to, and recovering from cyber incidents.
• How to do it:
• Establish clear roles and responsibilities for incident response.
• Create a detailed incident response plan that outlines procedures for containment, eradication, and recovery.
• Regularly test your incident response plan through tabletop exercises.
• Establish a clear process for reporting "significant cybersecurity incidents" to the SEC.
• SEC Reporting:
• Understand the definition of a "significant cybersecurity incident," as defined by the SEC.
• Establish a clear process for determining when an incident requires reporting.

Step 4: Enhance Third-Party Vendor Management —Control The Extended Network

• What it means: Ensure that your third-party vendors have adequate cybersecurity controls in place.
• How to do it:
  • Conduct thorough due diligence on potential vendors.
  • Include cybersecurity requirements in vendor contracts.
  • Regularly monitor vendor compliance with cybersecurity standards.
  • Establish a plan for addressing vendor-related cybersecurity incidents.
• Contractual obligations: Make sure that your vendors have contractual obligations regarding notification of cyber incidents.

Step 5: Implement Continuous Monitoring and Training – Maintain Vigilance

• What it means: Regularly monitor your cybersecurity posture and provide ongoing training to employees.
• How to do it: 
  • Implement security information and event management (SIEM) systems to detect and respond to threats.
  • Conduct regular vulnerability assessments and penetration testing.
  • Provide ongoing cybersecurity training to employees, covering topics such as phishing awareness and password security.
  • Document all training.
• Annual Reviews: Remember that the SEC requires annual reviews of your cybersecurity programs.

Step 6: Document & Maintain Records —Demonstrate Compliance

• What it means: Meticulously document all cybersecurity efforts, and maintain accurate records.
• How to do it: 
  • Document your risk assessments, policies, incident response plans, and vendor due diligence.
  • Maintain records of all cybersecurity training and monitoring activities.
  • Ensure that your recordkeeping practices comply with SEC requirements.

By following these practical steps, RIAs can effectively prepare for the 2025 SEC cybersecurity rule changes and safeguard their clients' data.

AdvisorLaw’s Cybersecurity Services

Navigating the intricacies of cybersecurity compliance can be daunting. That's where AdvisorLaw comes in — we understand the complexities of cybersecurity for RIAs and offer a comprehensive suite of services designed to empower you with a robust cybersecurity posture:

• Your Unique Security Blueprint: We understand that your RIA isn't like any other. That's why we build tailored cybersecurity programs. We'll pinpoint your specific weaknesses, deploy the right defenses, and create a clear, actionable plan to respond, should the worst happen.
• Continuous Vigilance, Reduced Risk: Don't wait for a breach to find vulnerabilities. Our expert team provides ongoing, thorough risk assessments to keep your systems and processes secure and ahead of emerging threats.
• Fortify Your Client Data: We'll guide you through implementing robust security measures — from advanced firewalls and encryption, to granular access controls — keeping your client's sensitive information secure.
• Empower Your Human Firewall: Your team is your strongest defense. We'll deliver engaging training programs that equip them to recognize and neutralize cyberthreats, transforming your team members into proactive security advocates.
• Your Regulatory Compass: The SEC's rules change rapidly. We'll keep you informed and compliant so that you're always ahead of the curve and ready for the next regulatory shift.

Let AdvisorLaw be your partner in navigating the 2025 cybersecurity rule changes and beyond. We’re here to help you protect your firm and your clients. Contact our team today for a complimentary consultation.