Summary: The SEC Act of 1934 grants the commission disciplinary powers to ensure investor protection against fraud, maintain market integrity and discipline the members against misconduct. Under the US SEC regulations defined for data security and disposal, organizations must securely erase electronic equipment data when disposing of them at end of the lifecycle. In this blog, find out how BitRaser streamlines the process of data disposal and helps comply with SEC data disposal guidelines to safeguard large volumes of critical business data from breaches.
The Need for being SEC Compliant
In the United States, the Securities and Exchange Commission (SEC) is a regulatory body responsible for protecting investors, brokers, dealers, investment advisers, etc. from financial frauds in the securities market in order to support economic growth and enforce federal security law. The SEC thereby ensures that the securities market remains efficient and fair. It oversees that all investors get access to factual information about the investments before making a considerate buying decision. Read here how SEC protects PII information through its regulations.
All financial bodies. Investment companies are required to stay compliant with SEC in order to avoid penalties. In our previous article, we shared how the banking giant Morgan Stanley was fined USD 35 Million by SEC for not protecting customer PII at the time of Data Center De-commissioning. Such incidents highlight the importance of data privacy and the need for SEC data disposal compliance rules for public companies to ensure that they are maintaining proper data security and protecting their investors’ confidential information.
Key SEC Compliance Guidelines Businesses Need To Know
The Securities and Exchange Commission (SEC) is primarily responsible for regulating the securities industry, but it also has a role in regulating the protection of sensitive information that businesses collect, use, store and dispose of. Section 216 of the FACT Act of SEC requires that “Any person that maintains or otherwise possesses consumer information, or any compilation of consumer information, derived from consumer reports for a business purpose, properly dispose of any such information or compilation.” (Find Source). Some key SEC compliance guidelines related to data privacy that businesses should be aware of include:
- Regulation S-P (Privacy of Consumer Financial Information and Safeguarding Personal Information): This regulation requires brokers, dealers, and investment advisers to provide their customers with privacy notices that describe their policies and procedures for protecting non-public personal information. Under 17 CFR Subpart A § 248.30 – the regulation stresses upon the need of data disposal that is getting rid of consumer report information securely, before selling, donating, or transferring any physical medium, such as computer equipment, that contains consumer report information.
- Regulation S-ID (Identity Theft Red Flags Rules): This regulation requires broker-dealers, investment companies, and certain other entities to establish and maintain a written identity theft prevention program designed to detect, prevent, and mitigate identity theft in connection with certain customer accounts by implementing reasonable data disposal policies.
- Regulation FD (Fair Disclosure): This regulation prevents publicly traded companies and other issuers from selectively disclosing material nonpublic information to specific individuals or entities, such as stock analysts or securities holders, who may trade based on the information. Instead, the issuer must publicly disclose the information to promote fair and complete disclosure. Regulation FD doesn’t specify how companies should dispose of information after disclosure, but SEC expects companies to have policies to protect confidential/sensitive information and protect from unauthorized access.
- Rule 17a-4: This rule requires broker-dealers to preserve certain records such as trade confirmations, account statements, and communications related to securities transactions for a specific period and dispose of them as soon as the purpose is met. Broker-dealers must also ensure that the records are stored in a manner that is compliant with the rule’s requirements for accessibility, accuracy, and security.
- Rule 30a-2: This SEC compliance rule lays out that registered investment companies must maintain certain records and documents which contain information about investors, securities transactions, and private data related to their operations and financial performance. The purpose of Rule 30a-2 is to provide transparency to investors about the financial condition and investment holdings of registered investment companies.
How Can Organizations Protect PII & Remain SEC Compliant?
While data privacy is not specifically under the purview of the SEC, it has issued guidelines and regulations that require companies to protect their customers’ personal information and dispose of it within a stipulated time frame to maintain data security. Here is an outline of the responsibilities of organizations to meet SEC data privacy requirements:
- Define Data for Protection: Start by identifying the sensitive financial information that your organization handles, such as customer personally identifiable information (PII), trading data, and financial reports.
- Conduct a Risk Assessment: Conduct a risk assessment to identify potential data privacy risks and determine how to mitigate them. This includes identifying potential threats, vulnerabilities, and the impact of a data breach.
- Implement Appropriate Security Measures: Implement appropriate security measures to protect the sensitive financial information your organization handles. This includes using encryption, access controls, firewalls, anti-virus software, and regular data erasure activities.
- Train Employees: Train employees on data privacy policies and procedures, including how to handle sensitive financial information, how to detect and report data breaches, and how to respond to data breaches.
- Monitor Compliance: Monitor compliance with data privacy policies and procedures to ensure that employees are following them, and the issues and violations are proactively addressed.
- Regularly Review and Update Policies: Regularly review and update data privacy policies and procedures to ensure they are effective and relevant amidst the changing regulations and threats.
Leverage the Power of BitRaser to Achieve SEC Compliance
For organizations that handle sensitive financial information or PII that is subject to regulatory compliances like the Securities and Exchange Commission, a certified data wiping software like BitRaser is an effective way to safeguard such data from falling into wrong hands. The software is tested for its efficacy by NIST and its advanced features ensure that your data is irrecoverable. Some of the ways by which BitRaser software helps comply with SEC rules for data disposal:
- Software erases PII, financial information, etc. securely in order to comply with SEC and other federal laws and regulations. The tool allows for verification within the software.
- BitRaser data erasure detailed reports and certificates help financial companies maintain immutable audit trails to demonstrate compliance with SEC. These reports can be maintained for lifelong in the cloud console for anytime anywhere access.
- BitRaser allows choosing from various global data erasure standards to help follow secure data disposal in line with SEC Regulations.
In today’s increasingly complex business environment, achieving SEC compliance for any organization that operates in the financial sector or deals with sensitive financial information is more important than ever. It is not just a matter of ticking boxes and meeting regulatory requirements – it is about building trust with customers, investors, stakeholders and avoiding hefty penalties to remain in business. The process can be incredibly complex and challenging, requiring a thorough understanding of the regulatory landscape and the ability to implement the necessary controls and protocols.
BitRaser offers a comprehensive solution to wipe drives and devices providing organizations with the software they need to achieve SEC data disposal compliance efficiently while disposing of their IT Assets. Through its advanced data erasure capabilities, BitRaser ensures that all sensitive data is securely erased, protecting organizations from the risk of data breaches and non-compliance.
What is the penalty for violating SEC regulations?
The penalty for violating SEC regulations can vary depending on the nature and severity of the violation. The Securities and Exchange Commission (SEC) has the authority to impose civil and criminal penalties, as well as other sanctions such as fines. The SEC fined Morgan Stanley in 2016 for not protecting customer PII and fined the bank USD $35 million.
How can an organization comply with the SEC regulation for data disposal?
What types of reports related to data sanitization does BitRaser offer?
BitRaser provides a comprehensive set of data sanitization reports that allow users to verify the effectiveness of the data erasure process and ensure compliance with data protection regulations. Some of the information provided by the software in the reports include a Certificate of erasure, Erasure summary report, Audit Trail Report, and Drive Health.