SEC and OCIE Reach Out to B-Ds; Regulators Warn Firms to Use Enhanced Security on Cloud Storage; More on Protecting Seniors, and Oklahoma Gets Schooled on Cybersecurity Risks: Regulatory Update for June 2019

SEC Tackles Cloud Service Providers

For Investment Advisers and Broker-Dealers: SEC Actions

SEC announces 2019 CCO Outreach program details:

  • The 2019 National Compliance Outreach Program for Broker-Dealers, co-sponsored by the SEC and FINRA, will be held in Chicago on June 27, 2019. Registration opened on April 16, 2019, and is limited to 250 in-person attendees. See here for details, including a link to a live webcast for those unable to attend.
  • The 2019 Investment Adviser and Investment Company CCO National Outreach Program is underway through a series of regional meetings. Sessions are filling quickly as attendance is limited, but the Chicago meeting will also be available via live webcast. See here for details. Contributed by Cari A. Hopfensperger, Senior Compliance Consultant.

SEC Warns Advisers and B-D’s to Use the Bells and Whistles provided by Cloud-Based Storage Solutions; Follows up with Sweep: The SEC continues to scrutinize how investment advisers and broker-dealers protect client information and recently turned its focus to cloud-based storage solutions in its most recent risk alert. Interestingly, OCIE highlights the fact that many of these storage solutions have features to enhance security that firms have failed to set up appropriately. OCIE also included samples of effective practices, such as policies and procedures designed to support the initial installation, on-going maintenance, and regular review of the storage systems. OCIE also recommended that firms set basic standards for security configuration and schedule periodical maintenance of the systems. The SEC is following up this risk alert by conducting a sweep, asking firms about their use of cloud storage providers. Contributed by Jaqueline M. Hummel, Partner and Managing Director.

Protecting Our Senior and Vulnerable Investors: This initiative is spreading like wildfire throughout the regulatory agencies and state jurisdictions. States are adopting new legislation every month, and firms are working hard to improve their processes for protecting clients. One of my favorite, go-to resources is a web-page dedicated to senior issues from the law firm of Bressler, Amery & Ross, P.C. The firm has created an interactive 50 State Statute Survey map that should be referenced in every firm’s procedures manual. Given the rapidly changing regulatory landscape for protecting senior and vulnerable investors, firms must review the applicable state legislation with each instance of potential exploitation. The following are additional resources for your consideration:

Contributed by Rochelle A. Truzzi and Cari A. Hopfensperger, Senior Compliance Consultants.

For Broker-Dealers: FINRA Actions

Don’t Forget to Register: Firms that handle orders in NMS Stocks, OTC Equity Securities, or Listed Options will be subject to the CAT NMS Plan (Consolidated Audit Trail) reporting requirements, no exceptions. FINRA issued Regulatory Notice 19-19 to remind firms that registration with FINRA CAT LLC is due by June 27, 2019. Under the CAT NMS Plan, firms may self-report data to the Consolidated Audit Trail, use a 3rd party vendor to report on their behalf, or use a combination of the two reporting methods. All subject firms must register, regardless of their reporting method(s). Registration is easy and must be completed on-line through the CAT NMS Plan website. FINRA hosted an industry webinar on March 19th and established a web page regarding the consolidated audit trail. Bookmark the Consolidated Audit Trail website for information on future developments and the Plan timeline. Contributed by Rochelle A. Truzzi, Senior Compliance Consultant.

Your Firm’s AML Program May Require Your Attention: FINRA reminded firms of their existing obligations under the Bank Secrecy Act to develop surveillance procedures reasonably designed to detect and trigger reporting of suspicious activities to FinCEN. FINRA Notice 19-18 outlined the reporting requirements found under the Treasury’s SAR rule and provided an updated, non-exhaustive list of potential money laundering red flags that may apply to your firm’s business. The original list issued by FINRA in NTM 02-21 simply enumerated 25 potential red flags. The update list is divided into six categories and consolidates 97 examples of red flags previously issued by FINRA, the Financial Action Task Force, FinCEN, the U.S. Department of State, and the SEC. FINRA urged firms to consider incorporating the additional red flags, as they may apply, into their AML policies and procedures that address the monitoring, investigation, and reporting of suspicious activities. Finally, FINRA advised firms to consider emerging areas of risk, such as money laundering risks that may be associated with activity in digital assets. Contributed by Rochelle A. Truzzi, Senior Compliance Consultant.

Classic Role Reversal involving the Oklahoma Department of Securities: During the month of May, the Oklahoma Department of Securities (“Department”) began notifying affected individuals, including certain registered securities representatives, of a data breach incident that occurred back in December of 2018 (see below). According to a report published by The UpGuard Data Breach Research Team on January 19, 2019, the breach involved three terabytes of data and millions of files dating from 1986 to 2016 (UpGuard provides cybersecurity services and regularly monitors the web for public data exposures).


An unsecured server was discovered on December 7, 2018, by UpGuard researcher, Greg Pollock, during a routine search of the web for exposed data, and was reported to the Department on December 8. The Department secured the exposed server the same day. UpGuard reported “(t)he exposure was identified only one week after it showed up in Shodan’s catalog of global IP addresses[1]” explaining that, “[s]hortening the window of exposure reduces the likelihood of other parties accessing the data and enables its owners to take responsive measures before the data is used maliciously.” However, the Department failed to notify affected individuals for more than five months, delaying the implementation of responsive measures and exposing the affected individuals to additional risk.

Also noteworthy, UpGuard gave the Department’s website a Cyber Risk Score of 171 out of a possible 950, indicating “severe risk of breach.” The low score was, in part, the result of the Department’s continued use of servers well beyond their “end-of-life,” when updates to patch vulnerabilities were no longer available. As reported by Thomas Brewster of Forbes, UpGuard identified the Department’s use of simple passwords and practice of saving encrypted documents in the same folder as decrypted versions as additional signs of weakness in the Department’s cybersecurity program.

I encourage you to use this information to strengthen your existing cybersecurity program and enhance your review of your firm’s system security measures. Contributed by Rochelle A. Truzzi, Senior Compliance Consultant.

For Mutual Funds: SEC Actions

Liquidity Risk Management Programs – Reminder to Small Fund Complexes: June 1, 2019, is the date small fund complexes have been waiting for — the deadline for fund families with less than $1 billion in assets to adopt a liquidity risk management program under Rule 22e-4 of the Investment Company Act of 1940 (the “Liquidity Rule”). This deadline also requires appointing a Program Administrator and limiting investments in illiquid securities to 15% of the fund’s portfolio. These same small fund families still have until December 1, 2019, to implement liquidity classifications and the elements of the liquidity rule that are related to liquidity classifications, including the establishment of a highly liquid investment minimum (or HLIM). Given the phased-in compliance dates, we see many fund boards review liquidity risk management programs ahead of the initial June 1 compliance date, but wait to issue formal approval of these programs until closer to the December compliance date. The SEC’s Investment Company Liquidity Risk Management Programs Frequently Asked Questions are a useful reference. Refer to our prior blog post for additional details. Contributed by Cari A. Hopfensperger, Senior Compliance Consultant.

For Hedge Fund Managers: CFTC/NFA Actions

CFTC Amends its Privacy Regulations. Not to be outdone by other regulators, the CFTC recently amended its privacy regulations (CFTC Regulation 160.5) to incorporate the Fixing America’s Surface Transportation Act (“FAST Act”) amendment to the Gramm-Leach-Bliley Act (“GLB”). In the amendment, the CFTC allows certain commodity trading advisors, commodity pool operators, retail foreign exchange dealers and futures commission merchants (“covered persons”) to avoid sending out an annual privacy notice. More specifically, the amendment permits covered persons to skip the annual privacy notice as long as the firm’s privacy practices have not changed since the last notice was delivered to clients, and the firm only shares non-public information in limited situations. Contributed by Cari A. Hopfensperger, Senior Compliance Consultant.

CFTC DOE Issues its First Public Enforcement Manual. For the first time, the CFTC Division of Enforcement publicly released its enforcement manual. In its press release, James McDonald, Enforcement Director, commented that “Our Manual aims to increase the level of clarity and transparency in our work. Clarity and transparency in our policies should promote fairness, increase predictability, and enhance respect for the rule of law. We expect the publication of our Manual to advance these goals going forward.” Contributed by Cari A. Hopfensperger, Senior Compliance Consultant.

[1] Shodan is a search engine for internet-connected devices.

Photo Credit: Photo by Eberhard Grossgasteiger on Unsplash

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Hardin Compliance Consulting LLC

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JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

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