Is Your Data Protected?

In today’s digital world, individuals and companies have become increasingly comfortable transacting online, exchanging and storing data to conduct business more efficiently. The alternative investments industry is no exception as it has begun to follow in the footsteps of most exchange traded products to streamline and accelerate electronic subscription processing.

Need for Greater Data Security

With digital processing comes the need for greater data security. An alarming number of data breaches make news headlines every day. Companies, especially those dealing with personally identifiable information (PII), must protect their own information as well as safeguard investor data by implementing exceptional data security solutions. No doubt true for large companies like Equifax, that experienced a breach in 2017 that affected 147.9 million people,1 broker dealers, RIAs, family offices and investment sponsors that control the PII data of high net worth families are especially targeted by bad actors seeking names, addresses, social security numbers and more to use or sell for nefarious purposes.

Hacking — A reputation nightmare

Imagine how an insecure process at a financial services firm affects not only the company reputation, but creates immeasurable anxiety and financial liability for the firm and its clients. In recent weeks, an individual outside our firm shared a data security horror story with us. An advisor of a wealthy individual emailed Reg D subscription documents to his client for completion and execution. Along with completing and signing subdocs that contained PII – including Social Security and account numbers – identity documents (scanned copy of the client's drivers license) and a trust document were emailed back to advisor. These emails and the attachments were hacked, revealing his PII and exposing the client to potential identify theft and fraud. As a result of this data breach and subsequent identity theft, the advisor is in a precarious reputational and dangerous legal position. In addition, the compromised client is livid and must now monitor his credit, perhaps for years...while the advisor must deal with the fallout of compromised client data. In an industry in which word-of-mouth marketing is a key source of business, a poor data security reputation can be devastating.

In an industry in which word-of-mouth marketing is a key source of business, a poor data security reputation can be devastating.

High Cost to Losing the Data Security Game

In addition to the reputational damage ineffective data security can cause, the real costs of being the victim of a cybercrime are high. It’s estimated that global cybercrime costs will grow by 15% per year, reaching $10.5 trillion by 2025, up from $3 trillion in 2015.2 Firms without solid data security software, advanced data architecture and protocols that fall victim to a breach often struggle to absorb the high cost of remediation. The cost to preemptively defend against a data breach is miniscule compared to the cost of defending against legal action and liability from cyber-theft caused by outdated or lax data security.

How to Protect Data

One of the best ways to protect your firm and your clients is by investing in an advanced, closed-end system with robust security layers and protocols to process alternative investment subscriptions. These systems have multiple safeguards like secure SOC 2 compliant data storage, encryption for data in transit and archived, as well as tokenized vaults where all PII is stored as code. Unlike transmitting sensitive data over email or storing it in external apps like Dropbox, no data is exposed, and systems are routinely penetration-tested to ensure a durable barrier between cybercriminals and your firm and client data.

Data Security is Like Homeowner’s Insurance for Your Business

Nobody likes to pay for homeowners insurance. But, nobody complains about the cost when disaster strikes. As you consider implementing a data security solution for private investment subscription processing, think of why you buy homeowners insurance. You buy it to protect against that rare catastrophic event that can ruin to your business and client's financial wellbeing. The cost of planning ahead will be far less over time than the expense of falling victim to a cybercrime – not only in dollars or business continuity, but to your reputation. A protective investment in secure subscription processing for private investments is well worth it to continually deflect attacks and minimize you and your clients' risk.

Learn More

In today’s world, cyber attack frequency is exploding. If you or your firm haven’t personally been hacked, you likely know someone who has. At VENTURE.co, we help you mitigate your risk. We provide broker-dealers, advisors, family offices and investment sponsors solutions to process alternative investments in a secure environment. Contact us today to learn more.

References:

“What is Cyber Security and Why is it Important,” Southern New Hampshire University, February 10, 2021.

“Cybercrime to Cost the World $10.5 Trillion Annually by 2025,” Cybercrime Magazine, November 13, 2020.