SEC Issues New Risk Alert on “Credential Stuffing” Attacks

Faegre Drinker Biddle & Reath LLP

Faegre Drinker Biddle & Reath LLP

On September 15, 2020, the SEC’s Office of Compliance Inspections and Examinations (OCIE) issued a Risk Alert highlighting the recent uptick in “credential stuffing” cyber-attacks against SEC-registered investment advisors and broker dealers.

Credential stuffing is an automated cyber-attack on Internet-based user accounts and firm networks. Attackers obtain usernames and passwords from the dark web and then employ automated scripts utilizing the compromised information to attempt to log in and gain unauthorized access to other customer accounts and firm networks. Credential stuffing has proven to be a more effective way for hackers to gain access to accounts and firm systems than traditional brute force password attacks have been. If the credential stuffing attack is successful, attackers can gain access to and control over customer assets and confidential information.

The Risk Alert notes that firms have taken a number of steps to combat credential stuffing attacks, including:

  • Periodically reviewing and updating password policies to ensure compliance with industry standards and best practices
  • Requiring Multi-Factor Authentication (MFA), which involves multiple verification methods to authenticate a customer’s identity
  • Implementing a Completely Automated Public Turing test to tell Computers and Humans Apart (CAPTCHA), which requires users to perform an action — e.g., identifying pictures of a particular object within a grid of pictures — to prove they are human
  • Deploying controls to monitor for a higher-than-usual number of login attempts over a given period of time and using a Web Application Firewall (WAF) that can detect and inhibit attacks
  • Conducting surveillance of the dark web for lists of leaked user IDs and passwords

The Risk Alert is the latest reminder of the significant emphasis that the SEC places upon safeguarding customer records and information from cyber-enabled threats.  Moreover, through the release of the Risk Alert, the SEC has put firms on notice that enforcement actions may be contemplated for companies that are victimized by credential stuffing and other cyber-enabled attacks. The Risk Alert underscores the importance of devising and maintaining a system of internal controls to address customer account protection and to identity theft prevention.  Firms should also consider whether they need to enhance or improve their policies and procedures dealing with customer account protection. Finally, firms should encourage their customers to take proactive steps to protect their own accounts and sensitive information.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Faegre Drinker Biddle & Reath LLP | Attorney Advertising

Written by:

Faegre Drinker Biddle & Reath LLP

Faegre Drinker Biddle & Reath LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.