Editor’s Note: The Chairman’s statement highlights the SEC’s intent to substantially expand biting cybersecurity-related regulation of publicly traded companies.
From: MarketWatch
Ronald D. Orol
The Twitter hack — when the U.S. stock market briefly plunged following a fake tweet that appeared April 23 on the Associated Press feed – “reminds us” that technology systems are vulnerable and need to have “state of the art” safeguards, according to Mary Jo White, the newly installed chairman of the Securities and Exchange Commission.
Talking to reporters Friday after giving her first formal speech as chairman of the agency before the Investment Company Institute meeting in Washington, White said that in these kinds of circumstances the SEC is monitoring the markets “in real time” and seeking to find out whether there should be an enforcement or regulatory response. However, she declined to comment on whether the agency was taking any further steps in response to the incident.
The U.S. stock market plunged in early afternoon trading Tuesday, briefly wiping out a triple-digit advance by the Dow Jones Industrial Average, after a fake tweet appeared on the Associated Press’s twitter feed describing a terror attack on the White House. The Twitter attack has raised questions about investment world’s use high-speed technology including “pattern recognition technology” — the use of sophisticated computers programmed to scan news streams including Twitter and other social media sites and make buy or sell decisions in the fraction of an instant. In addition to the Twitter hack issue, White discussed a pressing issue for the mutual fund industry — whether the agency will move forward with further reform efforts for the $2.7 trillion money-market fund industry. Not providing much new detail, White said agency staff and top officials are “actively” engaged in discussions to produce an “appropriate and balanced” proposal for reform of the industry.
Top SEC officials in recent months have discussed reform efforts for the industry, seeking to respond to concerns about systemic problems after a major fund, The Reserve Primary Fund “broke the buck” in 2008 by having a net asset value of below $1 a share.
The fund industry is opposed to any further regulation, arguing it could drive fund flow from money funds into bank deposits. White reiterated that the SEC’s goal is to preserve the economic benefits of money funds while addressing redemption pressures and the susceptibility of the funds to runs.
Her speech comes after the Wall Street Journal reported Friday, citing people familiar with the situation, that the agency may consider expanding rules for about half of the sector seen as most susceptible to runs. However, White declined to comment on specifics, noting that review of the money fund industry is an “ongoing process” within the commission and she expects to introduce a proposal in the “near future.”
Tighter rules will likely impact large money-fund operators, including Fidelity Investments, Federated Investors Inc. and Charles Schwab Corp.
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