Chapter 4 - Risks Faced By Investment Dealers

Questions and Answers

Which statement best describes the role of policies and procedures in a cybersecurity program?

They are only necessary for data transfer requirements and hiring practices.

They must reflect the firm-specific objectives and acceptable risk levels. (correct)

They focus exclusively on pre-employment screening processes.

They should be developed independently by each department without coordination.

What is the primary goal of a robust incident response plan?

To create a systematic approach for managing and minimizing incident effects. (correct)

To serve as a marketing tool to showcase security measures.

To ensure that no cyber incidents ever occur.

To focus solely on pre-incident preparations.

In which phase of incident management does establishing the governing framework occur?

Recover and learn phase.

Plan and prepare phase. (correct)

Detect and report phase.

Respond phase.

Which element is NOT typically covered by cyber-insurance policies?

Loss of physical property. Signup and view all the answers

What should be a critical consideration when developing cybersecurity policies?

They should reflect a coordinated effort among all business units. Signup and view all the answers

What is the recommended approach when clients request to transfer or pay funds?

Review established policies and ensure compliance with security measures. Signup and view all the answers

During the 'Detect and Report' phase, which activity is primarily focused on?

Monitoring for anomalous activities in internal and external systems. Signup and view all the answers

What is the importance of evaluating existing cyber-insurance coverage?

To determine if additional coverage for various cyber incidents is available. Signup and view all the answers

What is the primary purpose of conducting a risk assessment for a dealer member?

To develop and implement cybersecurity measures Signup and view all the answers

What should be the minimum frequency for conducting a risk assessment according to best practices?

At least annually Signup and view all the answers

Which aspect is NOT typically evaluated during a risk assessment for a dealer member?

Client relationship management strategies Signup and view all the answers

Which of the following is an example of an appropriate security measure after a risk assessment?

Installing a basic lock on a server room door Signup and view all the answers

What type of risks are investment registrants particularly vulnerable to, as identified in the content?

The misuse of client funds and confidential information Signup and view all the answers

What is one of the key components assessed regarding personnel during the risk assessment?

Personnel screening and hiring practices Signup and view all the answers

Why is it essential for the issues addressed in a risk assessment to be tailored to each dealer member?

To align with the specific business model and operations of the firm Signup and view all the answers

Which of the following security measures might be categorized as a basic requirement after identifying risks?

A basic lock on a server room door Signup and view all the answers

What is a critical aspect of formulating a cybersecurity approach for dealer members?

Ensuring coordinated solutions from senior management down to line staff Signup and view all the answers

Which document outlines requirements for reporting certain cybersecurity incidents?

Guidance Note 3700-22-001 Signup and view all the answers

What should compliance employees do when preparing a cybersecurity program?

Review a broad range of resources to determine the best approach Signup and view all the answers

What is the time frame within which cybersecurity incidents must be reported to CIRO?

Within 3 days of discovery Signup and view all the answers

Which regulatory body is NOT mentioned as providing guidance on cybersecurity?

SEC Signup and view all the answers

What is a primary benefit of implementing the Cybersecurity Best Practices Guide?

To develop a voluntary framework for managing cybersecurity risks Signup and view all the answers

How does the reporting processes for cybersecurity incidents compare to client complaint reporting?

They follow similar reporting timelines Signup and view all the answers

Which of the following describes an aspect of risk governance in the context of cybersecurity for dealer members?

Cybersecurity requires an enterprise-wide solution involving all levels of staff Signup and view all the answers

Study Notes

Risk Assessment

Risk assessment is crucial for determining a dealer member's exposure to cybersecurity threats.
Identifying potential threats helps in developing appropriate cybersecurity measures and practices.
Risk assessments should occur regularly, with at least an annual review recommended due to the gravity of cybersecurity concerns.
Investment dealers face risks like loss or theft of confidential client information, misuse of funds, and other proprietary data theft, which can harm clients and damage reputations.

Key Risk Evaluation Areas

Evaluation should cover all aspects of IT infrastructure.
Assessments should include cybersecurity awareness and training programs.
Management of both physical assets and employee devices is critical.
Personnel screening and hiring processes must be scrutinized for potential vulnerabilities.
Network security and data backup protocols are essential components of the assessment.
Account management practices need thorough evaluation.
Attention to relationships with third-party service providers is important.

Security Measures

Necessary security measures must be tailored to mitigate identified risks.
Examples of security measures include physical locks, advanced firewalls, and strict laptop handling guidelines.

Cybersecurity Risk

Cybersecurity presents challenges similar to those in anti-money laundering, necessitating coordinated enterprise-wide solutions.
Cyber attacks can severely damage a firm's reputation and operational viability.
Chief Compliance Officers (CCOs) must formulate comprehensive strategies for cybersecurity.
IIROC provides guidance through Notice 15-0294 and CSA publications, aiming to aid in effective cybersecurity program designs.
Timely reporting of cybersecurity incidents to CIRO is mandatory, with specific deadlines for incident investigation reports.

Policies and Procedures

Effective physical security measures require robust policies and procedures for optimal operation.
Policies should reflect the risks a dealer member is willing to accept.
Policies cover hiring practices, workplace procedures, data transfer, and fund transfer requests.

Cyber-Insurance

Cyber-insurance now includes coverage beyond data breaches, encompassing theft, business interruptions, and more.
Dealer members need to evaluate existing insurance coverage for potential enhancements through cyber-insurance.

Incident Response Plan

An effective cybersecurity program must include an incident response plan to lessen the impact of cyber incidents.
The incident management process consists of five key phases:
- Plan and Prepare: Framework establishment, team assembly, risk assessments, and policy development.
- Detect and Report: Active monitoring of systems for unusual activities; essential for early identification of threats.

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Description

This quiz covers the essentials of assessing risk in cybersecurity for dealer members. Understanding potential threats and vulnerabilities is crucial for developing effective cybersecurity measures. Regular risk assessment helps in addressing these vulnerabilities and enhances overall security.