The Financial Industry Regulatory Authority, or FINRA, has made a document available which financial and investment firms are going to want to pay close attention to. So that you may better assure your ability to remain in FINRA compliance, you’ll want to download and use the FINRA small firm cybersecurity checklist provided on their website.
Cybersecurity under FINRA compliance obligations is broadly defined as the protection of investor and firm information from compromise through the use—in whole or in part—of information technology.
Compromise refers to a loss of data confidentiality, integrity or availability. The FINRA checklist is provided to assist small member firms with limited resources to establish a cybersecurity program to identify and assess cybersecurity threats, protect assets from cyber intrusions, detect when their systems and assets have been compromised, plan for the response when a compromise occurs, and implement a plan to recover lost, stolen or unavailable assets.
This checklist is primarily derived from the National Institute of Standards and Technology (NIST) Cybersecurity Framework and FINRA’s Report on Cybersecurity Practices. Please consult the NIST framework and FINRA’s Report for a more in-depth discussion on the subjects listed herein.
This checklist is not exhaustive, and firms should address their cybersecurity program in a way that best suits their business model. There is no one-size-fits-all cybersecurity program.
Firms may choose to develop or use their own checklist, borrow sections from this checklist to include in their own checklist, or use a different resource (e.g., SIFMA’s small firm checklist, NIST guidance, or the Securities and Exchange Commission’s guidance). Firms that use this checklist must adapt it to reflect their particular business, products and customer base.
Please note: Use of this checklist does not create a so-called “safe harbor” with respect to FINRA rules, federal or state securities laws, or other applicable federal or state regulatory requirements.
Using the FINRA small firm cybersecurity checklist, firms will identify and inventory their digital assets, assess the adverse impact to customers and the firm if the assets were compromised, identify potential protections and processes that secure the assets, and then make a risk-based assessment considering their resources, the consequences of a potential breach and available protections and safeguards.
Firms may decide to remediate or address some high-level risk impact security vulnerabilities or they may decide that the threat is a low-level risk impact which they can accept. Firms should articulate why they decided to remediate or chose not to remediate.
Completing the FINRA small firm cybersecurity checklist will require time and effort from senior executives at your firm. At a minimum, firms should know the assets that are vulnerable to a cyber-incident, and they should assign a risk level to these assets. Senior executives will then be informed on how best to allocate firm resources to protect the firm’s and customers’ information. See below for questions.
At small firms, one person may be responsible for operations, compliance and legal functions including the cybersecurity program, and he or she may not understand the technology at issue or terms used in the FINRA small firm cybersecurity checklist. In this instance, the firm may consider working with outside technology help (where KalioTek comes in), industry trade associations or other peer groups, their vendors or their FINRA Regulatory Coordinator to understand the information discussed in this checklist. Many small firms rely on clearing firms and vendors to maintain customer accounts and transact business. but these small firms should not assume that others are responsible for preventing or reacting to a cyber-incident.
“This checklist is in Excel and uses Excel formulas. The person completing this checklist should have a basic knowledge of Excel. If no one at the firm has these skills, please send an email to firstname.lastname@example.org to schedule a call. There are also many helpful video tutorials on Excel available on YouTube.
Please note: If you need to insert a new row in Section 1, you will also need to insert rows on the other Sections and copy the pre-existing formulas into the newly inserted cells.”
Important FINRA Small Firm Cybersecurity Checklist Questions
Please review the five questions below and based on your answers, you should complete the sections (12 tabs total) applicable to your business. The five core sections of the checklist follow the NIST Cybersecurity Framework: Identify, Protect, Detect, Respond, and Recover.
Questions about your firm’s assets and systems will include:
1) Do you store, use or transmit personally identifiable information (PII) (e.g., social security numbers or date of birth) or firm sensitive information (e.g. financial records) electronically?
If you answer yes to question 1, you will fill out the following sections of the Cybersecurity Checklist:
- Section 1 – Identify and Assess Risks: Inventory
- Section 2 – Identify and Assess Risks: Minimize Use
- Section 4 – Protect: Information Assets
- Section 6 – Protect: Encryption
- Section 8 – Protect: Controls and Staff Training
- Section 9 – Detect: Penetration Testing
- Section 10 – Detect: Intrusion
- Section 11 – Response Plan
2) Do you transmit PII or firm sensitive information to a third party, or otherwise allow access to your PII or firm sensitive information by a third party?
If you answer yes to question 2, you will fill out:
Section 3 – Identify and Assess Risks: Third Party Access
3) Do your employees (or independent contractors) maintain devices that access PII or firm sensitive information?
If you answer yes to question 3, you will fill out: Section 7 – Protect: Employee Devices
4) Do you have assets that if lost or made inoperable would impact your firm’s operations (e.g., trading or order management systems)?
If you answer yes to question 4, you will fill out:
Section 5 – Protect: Systems Assets
5) If your systems, PII or firm sensitive information were made inoperable or stolen, would you need to recover them to conduct business?
If you answer yes to question 5, you will fill out:
Section 12 – Recovery
FINRA Small Firm Cybersecurity Checklist Resources include:
- Helpful Links
- General Application
- NIST framework
- FINRA’s Report on Cybersecurity Practices
- SANS Critical Security Controls for Effective Cyber Defense
And, there is much more to the FINRA small firm cybersecurity checklist, as you will see when you download and adapt it as part of your financial or investment firm’s cybersecurity guidelines.
We can guide you in fully understanding and utilizing everything in this document.
Need Consultancy on Understanding the Small Firm Cybersecurity Checklist from FINRA?
If so, the KalioTek team provides the widest range of possible IT services in the San Francisco Bay Area. What we really deliver is peace of mind for business executives who want to know this domain’s IT security and performance is being managed by a competent professional team, allowing them to focus on their business priorities.
And, where providing consultancy on cybersecurity checklists are concerned, we’re a trusted IT confidant and partner.
Call us at (408) 550-8000, or email us at email@example.com to learn more about how to get our consultancy on the (download here:) FINRA small firm cybersecurity checklist and other issues related to implementing the provisions of this crucial document.