SEC Chairman reveals financial reporting system was hacked

Securities and Exchange Commission Chairman nominee Jay Clayton testifies on Capitol Hill in Washington at his confirmation hearing

The US Securities and Exchange Commission has revealed that its electronic company filings system was hacked a year ago and the information may have been traded on, writes Dave Michaels for The Wall Street Journal.

The market regulator's filing system in question, EDGAR, had information on everything from statements on the latest mergers and acquisitions, to quarterly earnings.

"Effective management of internal cybersecurity risk is critical to the SEC achieving its mission and to protecting the nonpublic information that is entrusted to this agency", SEC Commissioner Michael Piwowar said in a statement.

The system that was breached, known as EDGAR, is a popular way for investors to access the detailed financial reports companies that sell stock to the public must periodically release.

Although the problem was nearly immediately patched in 2016, it's noteworthy that the regulator only became aware that the glitch could have provided the basis for "illicit gains through trading" last month.

Clayton said that the SEC has experienced cybersecurity vulnerabilities before, including an incident in 2014 when the inspector general found that certain SEC laptops that may have contained nonpublic information could not be located, and found instances in which SEC employees transmitted nonpublic information through nonsecure personal email accounts.




But in August the SEC learned that it may have been exploited for trading gains.

The order put responsibility for cybersecurity on the shoulders of the director of every federal agency, making it more hard for executives to pass the buck to their information technology staffs.

"In today's environment, cyber attacks are perpetrated by identity thieves, unscrupulous contractors and vendors, malicious employees, business competitors, prospective insider traders and market manipulators, so-called 'hacktivists, ' terrorists, state-sponsored actors and others", Clayton said.

The SEC says this was possible due to a "software vulnerability in the test filing component of our EDGAR system".

The SEC did not provide any information on what companies were affected by the breach or how extensive it was. The Commission doesn't believe the event exposed personally identifiable information or produced systemic risk. A number of filings are immediately posted on Edgar when they are submitted to the database, so it's unclear what kind of information is kept non-public that could be a target for hackers.

But it is what the unknown hackers were able to see and make use of that has forced SEC to disclose the breach.

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