IOSCO releases "Cyber Security in Securities Market" Report

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The Board of the International Organization of Securities Commissions (IOSCO) released last month the report on its cyber risk coordination efforts.  The goal of the report is to provide an overview of the regulatory issues and challenges faced by various segments of the securities markets, in particular reporting issuers, market intermediaries and asset managers, and of the various frameworks and practices adapted by members of the IOSCO as the threat of cyber-attacks continues to grow.

Reporting Issuers

For reporting issuers, proper and timely disclosure continues to be of concern. The report highlights a number of factors that issuers consider in for disclosure of a cyber risk, once materiality has been determined, including the:

  • reason the issuer is subject to cyber risk;
  • source and nature of the cyber risk and how the risk may materialize;
  • possible outcomes of a cyber incident;
  • adequacy of preventative measures and management’s strategy for mitigating cyber risk; and
  • whether a breach has occurred previously and how this affects the issuer’s overall cyber risk.

From a regulatory perspective, the report indicates disclosure remains subject to materiality analysis and dependent on an issuer’s specific circumstances. Regulators in the U.S. and Canada continue to issue guidance on specific disclosure obligations in connection with cybersecurity (see our previous post here).

Interestingly, the report points out that those issuers that have been affected by a cyber incident tend to provide more detailed disclosure than either other issuers that have not reported an attack or the same issuer prior to the incident.

Trading Venues

According to the participants surveyed, there has been considerable investment in the development and implementation of more sophisticated tools to detect and respond to threats.  Honey pots and other decoy options are being deployed to collect data on intruders and attempted attacks that can be used to provide advance warning.  Security Information and Event Management (SIEM) tools are being combined with threat intelligence services to allow for a more proactive response to a cyber threat.  Trading venues are increasing their vigilance on internal information and on third party providers.  Global initiatives for collaboration and information sharing, such as GLEX, are growing and are seen as valuable tools to share practices and participate in war-game like drills.  From a regulatory perspective, regulators have used examination sweeps, guidelines and frameworks to raise awareness levels on cyber security.  The report mentions Canada’s NI 21-101 (available here) as an example of required cyber security controls “systems that support order entry, order routing, execution, trade reporting, trade comparison, data feeds, market surveillance and trade clearing.”

Market Intermediaries

The report indicates that regulators of the member jurisdictions have taken various steps to strengthen cyber security efforts of market intermediaries.  In the U.S. for e.g., the SEC adopted regulation requiring certain regulated financial institutions to implement identify theft programs (see here) and Financial Industry Regulatory Authority (“FINRA”) issued eight principles and practices which include:

  • Governance;
  • Cyber security risk assessment;
  • Implementation of technical controls;
  • Establishment of policies and procedures for an incident response plan;
  • Vendor management;
  • Cyber security training for staff;
  • Cyber intelligence gathering and sharing; and
  • Cyber insurance.

While not included in the IOSCO report, Industry Regulatory Organization of Canada (“IIROC“) has published guidelines to help IIROC regulated firms protect themselves and clients against cyberattacks (see our previous post here).

Asset Managers

There is a growing concern among asset managers of the threat to data integrity “through the manipulation of data such as net asset values, trading algorithms and portfolio holdings”, which could be far more serious than attacks to the availability of systems (denial of service attacks or DDoS) and data theft.  The report highlights the following practices adopted by the asset managers surveyed:

  • identify key digital assets to allow for better allocation of resources, i.e. based on risk profile;
  • implement effective control and protection measures;
  • implement on going employee training including a culture of responsibility and accountability;
  • monitor systems and data usage to facilitate detection of abnormal patterns;
  • develop detailed and actionable incident response plans;
  • access and share actionable threat information;
  • conduct diligence reviews with third party service providers and understand if 4th party providers are used; and
  • reassess the firm’s cyber resilience, vulnerabilities and protection

The report found that 75% of firms surveyed require all employees to undergo security information training; 79% have ensured their architecture is consistent with a recognized security framework (e.g. IESO, NIST) and 40% have contracted cyber security insurance policies.


While there is no one size fits all approach to cyber security, there are commonalities in the approaches and practices of the different market segments that could be relevant across segments. Risk management components across the board include governance, identification, protection, detection, response and recovery.  Governance practices continue to develop and involve senior management and company boards and are a fundamental aspect of any risk management program.

The report highlights the importance of trust among participants of information sharing networks as essential for its viability and the important role regulators can play in providing the proper incentives for market participants to contribute to such networks.


Cybersecurity Financial Institutions regulatory guidance



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