SFC and HKMA address hacking risks associated with internet trading
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The Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) recognise the need for effective cybersecurity management as cyber risk poses an increasingly significant threat to the integrity, efficiency and soundness of financial markets worldwide. Over the past few years, the SFC and the HKMA have provided a range of guidance on cybersecurity to the intermediaries they regulate (Note 1).
Today (October 27) the SFC issued Guidelines for Reducing and Mitigating Hacking Risks Associated with Internet Trading requiring all licensed or registered persons engaged in internet trading (Note 2) to implement 20 baseline requirements to enhance their cybersecurity resilience and to reduce and mitigate hacking risks (Note 3). Also today, the HKMA issued a circular requiring registered institutions to enhance the security of their internet trading services having regard to the requirements in the SFC's guidelines.
One key control, the implementation of two-factor authentication for clients to login to their internet trading accounts, will take effect on April 27, 2018, while all other requirements will take effect on July 27, 2018.
"Robust preventive and detective controls are essential to reduce and mitigate cybersecurity risks," said the SFC Executive Director, Ms Julia Leung. "Given that passwords have not proven effective to prevent hacking, two-factor authentication is an important part of effective cybersecurity risk management."
The Deputy Chief Executive of the HKMA, Mr Arthur Yuen, said, "I am glad that consensus has been reached for the banking and the securities industries to adopt two-factor authentication for internet trading and strengthen related cybersecurity controls. These enhancements are necessary to protect investors from cyber threats targeted at them."
The release of the SFC's guidelines follows a public consultation (Note 4) to which 36 responses from the securities and banking industry were received.
Note 1: As defined in Schedule 1 to the Securities and Futures Ordinance, "intermediary" means a licensed corporation or a registered institution. "Registered institutions" are authorised institutions under the Banking Ordinance which are registered with the SFC to conduct regulated activities.
Note 2: This refers to licensed or registered persons who, through internet-based trading facilities, are engaged in dealing in securities or futures contracts, in leveraged foreign exchange trading or in distributing funds under management.
Note 3: In Consultation Conclusions on Proposals to Reduce and Mitigate Hacking Risks Associated with Internet Trading, also issued by the SFC today, the application of Paragraph 18 and Schedule 7 of the Code of Conduct for Persons Licensed by or Registered with the SFC is expanded to cover intermediaries which conduct internet trading of securities that are not listed or traded on an exchange.
Note 4: On May 8, 2017, the SFC issued a Consultation Paper on Proposals to Reduce and Mitigate Hacking Risks Associated with Internet Trading.
Ends/Friday, October 27, 2017
Issued at HKT 17:23
Issued at HKT 17:23
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