- 8th November 2023
- Posted by: Mark Dodds
- Category: Financial Services
It’s pretty common for financial firms to use appointed representatives (ARs) to undertake regulated activities. While this practice offers flexibility and specialisation, it also opens a Pandora’s Box of security implications.
The inherent problem lies in the fact that these ARs operate as independent entities, using their own devices and best practices, which don’t always align with the stringent security protocols adhered to by the rest of the firm, also known as the “principal” firm.
The FCA expects principles to ensure that their ARs have adequate cyber resilience arrangements in place, and to oversee and monitor their compliance with the relevant rules and standards.
In this blog post, we explore the 5 main reasons why appointed reps could threaten the security of your firm and how to make sure you’re securing your highly sensitive information.
1. Outdated devices and software
One of the big concerns with ARs is the potentially outdated nature of their devices and software. Security breaches often occur due to unpatched software vulnerabilities, and ARs might neglect regular updates or not have enough cybersecurity measures in place to begin with. This can often be the case as self-employed individuals might not see the need to invest in cyber resilience measures if it’s just them and not multiple people within their business.
This oversight creates an open invitation for cybercriminals to exploit these vulnerabilities, jeopardising any sensitive information you’ve shared with the AR, as well as even the entire company network depending on how much access you have given them.
2. Lack of constant monitoring
Unlike in-house employees, appointed reps aren’t constantly monitored by the company’s IT department. This lack of oversight means that any suspicious activities or security breaches on their devices might go unnoticed for extended periods, giving hackers ample time to infiltrate the system.
3. Limited control and visibility
Appointed reps are often given administrative access which is not ideal for what is essentially a team member status. This unrestricted access allows them to install software, modify settings, and potentially compromise security protocols. In a team-oriented environment, such unregulated access can lead to unforeseen security breaches, leaving your firms sensitive data vulnerable.
4. Ransomware threats
Ransomware attacks are becoming increasingly sophisticated, and an ARs device can be easy targets. A compromised device could unknowingly host ransomware, leading to malicious data being injected into the company’s system or database. Such an attack can paralyse operations and have severe consequences for a company’s reputation.
5. Lack of offboarding protocols
When an AR moves on, the company faces a significant challenge – ensuring a seamless offboarding process. Sadly, many companies lack a defined offboarding process and without proper protocols in place, the AR could retain access to sensitive data, leading to potential data breaches or misuse. The absence of a well-defined offboarding process creates a security loophole that could come back to haunt the firm long after the AR’s departure.
So, what can be done?
Now we’ve cleared up the main threats of an appointed rep, we’re sure that the question on the tip of your tongue is what can be done to mitigate these risks? Key things firms can do to ensure they’re using an appointed rep’s services responsibly include:
Include ARs under the company umbrella
By integrating ARs into the company structure, firms can enforce uniform security protocols across all employees. This approach ensures that ARs adhere to the same standards as in-house staff, reducing the risk of security breaches significantly.
Provide company-owned devices
Alternatively, some companies opt to provide company-owned laptops exclusively for ARs’ work. While this incurs additional costs, it offers almost total control and visibility. The firm can implement strict security measures, monitor device usage, and enforce timely updates, thereby safeguarding their sensitive data effectively.
Implementing offboarding processes
Although it can feel like a drag, it’s really important that you have a policy in place for correct offboarding in the same way you’d offboard full time employees. This should include revoking access privileges where required, removing them from communication channels so they don’t have access to ongoing discussions/information, data wiping, and exit interviews. Whilst an exit interview may sound like overkill, it’s a great opportunity to ensure all boxes have been ticked and provides the chance to remind ARs of their confidentiality agreements and the importance of data security even after their departure.
Are you a Financial planning or Wealth management firm? Need some help with your IT? Contact us today to find out about our range of IT services – we can even help you ensure cybersecurity throughout your operations!