September 26, 2017 / 7:20 PM / 3 years ago

Breakingviews - Botched SEC hack probe a warning for other agencies

Jay Clayton, Chairman of the Securities and Exchange Commission, testifies at a Senate Banking hearing on Capitol Hill in Washington, U.S. September 26, 2017. REUTERS/Aaron P. Bernstein

WASHINGTON (Reuters Breakingviews) - A botched probe into a hack at the U.S. Securities and Exchange Commission is a warning for other regulatory agencies. Chair Jay Clayton told senators on Tuesday that he doesn’t know the exact timing of a 2016 breach and his predecessor may not have been notified. It’s troubling given the sensitive market data kept there.

During a Senate hearing, Clayton shed little fresh light on the breach into the SEC’s corporate-disclosure filing system, which the agency disclosed only last week. Clayton said he only learned about it in August, a few months after he joined the agency. He also said he doesn’t have any reason to believe that his predecessor, Mary Jo White, was notified. Agency bosses don’t have to be told about every hack, but a breach into the SEC’s EDGAR filing system, which is used by public companies and relied upon by investors, should have been reported promptly to the top.

Senators asked whether the hack raises concerns about other data housed at the SEC, including the consolidated audit trail scheduled to go live later this year. That will contain a record of orders for most equity and listed option trades, and non-public information about the customers behind them. Even before the SEC hack was revealed, stock exchanges and traders were worried about the potential for cyber attacks on the CAT.

At the Commodity Futures Trading Commission, investment firms have been worried about an automated trading plan that would give the agency access to trading-firm source codes without a subpoena. The agency is revising the rule after an industry backlash, but it is still likely to push for a database of trading records.

Several other regulators also house market-moving information, including enforcement actions. Deal reviews are conducted by the Justice Department, the Federal Communications Commission and the Federal Trade Commission. The Food and Drug Administration’s decisions on whether to approve new medications are closely watched by investors.

Agencies are also hampered by insufficient resources. Their purse strings are controlled by Congress, which routinely provides less funding than the SEC, CFTC and other agencies request. Investor worry over their defenses is justified.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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