An international trade organization is calling on hedge funds to bolster their cybersecurity this year, particularly in the wake of growing scrutiny from regulators and attacks from China.
Confusion over responsibilities, lack of preparation and a general misunderstanding of cybersecurity are the main obstacles hedge fund managers are encountering as they seek to safeguard data, according to the report issued last week by the Hedge Fund Standards Board.
The board issued that assessment after conducting its first “table top cyberattack simulation” for hedge fund managers in London, which gauged their response to scenarios that included data theft, attacks on financial infrastructure and “crypto ransomware” that restricts access to a system until the user pays a ransom.
The board found that the hedge fund managers who participated in the event had a hard time figuring out how to respond, making organizational preparedness potentially more critical than technical improvements.
“This attack simulation exercise has shown that dealing with the technical aspects of cyberattacks is often only a small part of the overall response, and that the senior management of the firm needs to be well-prepared to manage the aftermath of an incident,” said Bill Trent, a hedge fund director who spoke at the event.
The report comes after the Securities and Exchange Commission censured a St. Louis-based investment adviser in September for failing to uphold “required cybersecurity policies.” The firm lost personally identifiable information on 100,000 people, stored improperly on a third-party server, in a 2013 attack traced to China.
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A hedge fund manager who went unnamed called the Hedge Fund Standards Board event an “eye-opener regarding the complexity” of cybersecurity,”and “very timely in light of the heightened regulatory focus.” That includes, he said, the SEC’s intention to heighten testing of firms’ cybersecurity this year. The board is set to hold another simulation in New York in March.
