Hedge funds are increasingly the targets of cyber attacks, according to the SEC.
Assured SKCG, a risk management and insurance provider to the alternative asset industry, said managers are seriously considering cyber liability insurance as a response:
“Just last week it was reported that a large hedge fund was targeted by cybercriminals who crippled the fund’s trading strategy and sent proprietary information to off-site computers. This is just one example of the cyber threats faced in the 21st century by all hedge funds,” said Wayne Siebner, SVP of Assured SKCG, in a statement.
“Our clients are adding cyber liability insurance as a cost-effective way to transfer the risk of these types of attacks, and simultaneously demonstrate to investors and regulators that they’re taking these threats seriously.”
Assured points out that four of the top 10 largest breaches took place in the past 12 months; 66% of breaches took months (or more) to discover; about 70% of breaches were discovered by external parties; and 92% were perpetrated by organizational outsiders. Moreover, 37% of all breaches between 2012 and 2013 targeted financial firms.
No surprise, then, that both state and federal authorities are focusing more intently on cyber security issues. Over 47 privacy laws have been enacted at the state level while the Federal Energy Regulatory Commission, the Government Services Administration, the Department of Defense and the SEC’s Office of Compliance Inspections and Examinations recently issued a risk alert providing information concerning its ongoing initiative to assess cyber security preparedness for investment advisers and broker-dealers.
The SEC is specifically asking asset managers if they have cyber liability Insurance and to what extent.