As concerns about the digital security of Canada’s financial system continue to increase, regulators have introduced new rules requiring investment dealers to report any cybersecurity incidents. A big challenge is how those companies will get their investment advisors to be their eyes and ears on the ground.
In mid-November, the Investment Industry Regulatory Organization of Canada (IIROC) introduced mandatory cybersecurity incident reporting for its member dealers. They must inform the self-regulatory organization (SRO) of any cybersecurity incidents that disrupt their businesses in two ways. According to the rules, they must first “provide a preliminary description of the incident and steps taken to mitigate” its impact within three days. Then they “must provide a detailed investigation report, outlining the cause and scope of the issue, and steps taken to mitigate the risk of harm to investors and to the firm” within 30 days.
These new rules arrived just days before the Bank of Canada published its biannual Financial System Survey, in which senior experts who specialize in risk management provide their views on the resilience of Canada’s financial system. The danger of a large cyber incident ranked among the top three risks along with a general deterioration in the global economic outlook and a materialization of geopolitical risk events.
Dealers rely heavily on everyone in the organization when responding to cybersecurity incidents, says Bradley Freedman, partner and national co-leader of the cybersecurity law group at Borden Ladner Gervais LLP in Vancouver.
“Cybersecurity and privacy are team sports because they require a co-ordinated response.”
Advisors are a part of that team. As they deal with clients and their sensitive information every day, they represent the front line in any cybersecurity-related effort, says J.R. Cunningham, vice-president of strategic solutions at Herjavec Group, a Toronto-based provider of cybersecurity products and services to enterprises.
“In a lot of other campaigns centered around awareness, ‘If you see something, say something’ is a great tagline,” he says.
Advisors have a responsibility to educate themselves about cybersecurity, says Irene Winel, IIROC’s senior vice-president of member regulation and strategy.
“It’s a matter of good service and good business practice for advisors to stay up to date.”
Ms. Winel points to several IIROC resources to help advisors spot and report suspicious incidents. These include a Cybersecurity Best Practices Guide, a Cyber Incident Management Planning Guide and a Cybersecurity Tips for Advisors webcast continuing-education course.
At the same time, dealers themselves can be proactive in helping their advisors be aware of what to look for, Mr. Freedman says.
“An essential part of cyber risk management and privacy protection is education and training,” he says. “It can be done at a relatively low cost with significant return.”
Dealers can teach advisors what to watch out for without requiring them to be experts in technology-related matters, Mr. Cunningham says. They don’t have to be tech-savvy to understand what personally identifiable information means.
Dealers must make cybersecurity awareness training relevant to advisors, he adds. That means moving beyond dry lectures in an airless conference room and engaging advisors with practical exercises. In one increasingly common approach, companies send out fake phishing campaigns to test employees’ and contractors’ cybersecurity readiness. Companies can even gamify these exercises to help create a sense of healthy competition.
In many cases, it will be obvious to advisors immediately when they’ve done something wrong. “We’ve all had that lump in our throat after we clicked on a link and thought, ‘I shouldn’t have done that,’” Mr. Cunningham says.
The key to reporting cybersecurity incidents successfully is ensuring that advisors know what to do in those situations – namely, escalating the incident quickly so that the right people can deal with it.
“If something doesn’t seem right, knowing who to call and who to engage at a given time is what’s really important,” Mr. Cunningham says.
Advisors – especially those who report their own mistakes – must feel confident that they won’t be punished. It’s up to executives to create an atmosphere of trust, Mr. Cunningham adds.
Dealers may even consider giving advisors an incentive to report any cybersecurity incident, he suggests. That can be especially useful when dealing with large networks of independent advisors. Mr. Cunningham often sees this in retail and restaurant franchises.
“They’ll say, ‘If you adopt our standards, maybe we’ll help underwrite your cyber insurance risk or we’ll pay for your cyber policy because we’re confident that if you follow our technical standards, you’re not going to be breached.’”
Dealers could also engage advisors as active cybersecurity partners by brokering cybersecurity services. An investment company could procure technology protection tools and offer them to advisors at preferential rates to help engage them in cybersecurity reporting practices.
At the end of the day, advisors will need to keep honing their skills as dealers innovate with new technologies and hackers get ever more dangerous, Mr. Freedman warns.
“This is a permanent state of being for the foreseeable future. Organizations have to be on guard. They have to invest in people, processes and technologies to manage cyber risks and to protect the privacy of personal information.”
U.S. securities regulator probes investment advisers over crypto custody
By Chris Prentice
NEW YORK (Reuters) – The U.S. Securities and Exchange Commission is probing registered investment advisers over whether they are meeting rules around custody of client crypto assets, three sources with knowledge of the inquiry told Reuters.
The SEC has been questioning advisers’ efforts to follow the agency’s rules around custody of clients’ digital assets for several months, but the probe has gathered pace in the wake of the blow-up of crypto exchange FTX, the sources said. They spoke on condition of anonymity as the inquiries are not public.
Advisers managing clients’ digital assets typically use a third party to store them.
SEC enforcement staff are asking investment advisers for details around what the firms did to assess custody for platforms including FTX, one of the sources said. The broad enforcement sweep, which has not been previously reported, is a sign the top U.S. markets regulator’s scrutiny of the crypto industry is expanding to more traditional Wall Street firms.
A spokesperson for the SEC declined to comment.
By law, investment advisers cannot have custody of client funds or securities if they do not meet certain requirements to protect the assets. One of these demands that advisers hold such assets with a firm deemed to be a “qualified custodian,” though the SEC does not hold any specific list or offer licenses to firms to become such custodians.
The SEC’s investigation signals the regulator is targeting a long-brewing issue for traditional firms that have sought ways to invest in crypto, attorneys told Reuters. The agency’s accounting guidance has made it too capital-intensive for many lenders to hold digital assets on behalf of clients, limiting options for advisers seeking custodians.
“This is an obvious compliance issue for investment advisers. If you have custody of client assets that are securities, then you need to custody those with one of these qualified custodians,” said Anthony Tu-Sekine, head of Seward and Kissel’s Blockchain and Cryptocurrency Group.
“I think it’s an easy call for the SEC to make.”
Under Democratic leadership, the SEC has made crypto a priority area for enforcement, nearly doubling the size of its crypto team last year. But the regulator is under fresh pressure to go after crypto in the wake of a series of bankruptcies across the industry and the unveiling of U.S. charges against FTX’s founder and former head, Sam Bankman-Fried, for allegedly committing fraud. He has pleaded not guilty.
Two of Bankman-Fried’s associates, former Alameda chief executive Caroline Ellison and former FTX chief technology officer Gary Wang, have both pleaded guilty to defrauding investors and agreed to cooperate.
The SEC has also been probing FTX equity investors for details of their due diligence efforts when they invested in the crypto exchange.
(Reporting by Chris Prentice in New York; Additional reporting by Elizabeth Howcroft in London and Hannah Lang in Washington; Editing by Megan Davies and Leslie Adler)
Nestle unveils $100 million Colombia investment to grow capacity
BOGOTA (Reuters) -Global food giant Nestle is set to invest $100 million over the next three years in its Colombian operations, President Gustavo Petro said on Friday, part of his push to boost industrialization.
The Colombian leader outlined the announcement in a post on Twitter late Friday.
The new investment plan builds on $13 million already spent by the world’s largest food and beverage producer in the South American country, the government said in a statement, with the new funds to be focused on increasing production capacity and updating technology.
“Industrializing Colombia is essential if we want to get out of poverty,” Petro wrote on Twitter.
Nestle did not immediately respond to a request for comment.
But the statement quoted its top executive for Latin America, Laurent Freixe, as saying that the plan will allow the company to strengthen its product portfolio as well as align with some of the government’s priorities, such as promoting youth employment.
(Reporting by Luis Jaime Acosta and Carolina Pulice; Editing by David Alire Garcia and Sandra Maler)
Award-winning funds: Manulife Investment Management among top honourees from Fundata Canada
C$ unless otherwise stated TSX/NYSE/PSE: MFC SEHK: 945
Combined wins of 15 segregated funds,10 mutual funds and 2 ETFs earn Manulife Investment Management honours for 11 consecutive years
TORONTO, Jan. 27, 2023 /CNW/ – Manulife Investment Management was recognized by Fundata Canada for its performance in 15 segregated funds,10 mutual funds and 2 ETFs throughout the calendar year. With 27 funds earning FundGrade A+® Awards, Manulife Investment Management has been recognized with awards for 11 consecutive years, every year since the awards’ debut in 2012.
The FundGrade A+® Award is given annually to investment funds and managers who show consistent, outstanding, risk-adjusted performance through the year, based on up to 10 years of history. Achieving a FundGrade A+® Rating is an honour because only around 6% of the investment fund products available in Canada have received a FundGrade A+® rating.
“I would like to thank and congratulate the portfolio management teams and our colleagues who have enabled us to be recognized today,” said Patricia Corcoran, Head of National Sales, Manulife Investment Management, Canada. “Given the volatility and challenging economic conditions of the past year, I’m particularly proud of our team’s achievements in receiving these FundGrade A+® ratings. We are committed to providing Canadians with diverse investment solutions that meet investor needs, and this recognition demonstrates our success.”
The following segregated funds, mutual funds, and ETFs were awarded Fundata’s FundGrade A+® rating:
* Segregated fund performance shown for GIF Select InvestmentPlus, MPIP Segregated Pools and Manulife RetirementPlus funds are for the front-end sales charge. For Ideal funds, the performance shown is for the no-load sales charge. Performance for the winning segregated funds is for the period ending December 31, 2022. The Manulife RetirementPlus and Manulife Ideal segregated fund contracts are no longer open to new deposits effective October 2022.
**The Fundgrade A+® award applies to an entire fund family, including every segregated fund product and series where a fund is available. This fund has been listed twice to highlight that it is available in both GIF Select and MPIP Segregated Pools contracts.
***Mutual fund performance shown is for advisor series. Performance for the winning mutual funds is for the period ending December 31, 2022.
**** Performance for the winning ETFs is for the period ending December 31, 2022.
FundGrade A+® is used with permission from Fundata Canada Inc., all rights reserved. The annual FundGrade A+® Awards are presented by Fundata Canada Inc. to recognize the “best of the best” among Canadian investment funds. The FundGrade A+® calculation is supplemental to the monthly FundGrade ratings and is calculated at the end of each calendar year. The FundGrade rating system evaluates funds based on their risk-adjusted performance, measured by Sharpe Ratio, Sortino Ratio, and Information Ratio. The score for each ratio is calculated individually, covering all time periods from 2 to 10 years. The scores are then weighted equally in calculating a monthly FundGrade. The top 10% of funds earn an A Grade; the next 20% of funds earn a B Grade; the next 40% of funds earn a C Grade; the next 20% of funds receive a D Grade; and the lowest 10% of funds receive an E Grade. To be eligible, a fund must have received a FundGrade rating every month in the previous year. The FundGrade A+® uses a GPA-style calculation, where each monthly FundGrade from “A” to “E” receives a score from 4 to 0, respectively. A fund’s average score for the year determines its GPA. Any fund with a GPA of 3.5 or greater is awarded a FundGrade A+® Award. For more information, see www.FundGradeAwards.com. Although Fundata makes every effort to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Fundata.
Manulife Investment Management is a trade name of Manulife Investment Management Limited (formerly named Manulife Asset Management Limited) and The Manufacturers Life Insurance Company. The Manufacturers Life Insurance Company (Manulife) is the issuer of Manulife Investment Management insurance contracts and the guarantor of any guarantee provisions therein. Manulife Mutual Funds are managed by Manulife Investment Management Limited.
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund, ETFs and segregated fund investments. Please read the fund facts as well as the prospectus before investing in mutual funds, the ETF Facts as well as the prospectus before investing in ETFs and information folder, contract and fund facts before investing in segregated fund contracts. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds and ETFs are not guaranteed, their values change frequently, and past performance may not be repeated. Any amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value. Manulife, Manulife Investment Management, the Stylized M Design, and Manulife Investment Management & Stylized M Design are trademarks of The Manufacturers Life Insurance Company and are used by it, and by its affiliates under license.
About Manulife Investment Management
Manulife Investment Management is the global brand for the global wealth and asset management segment of Manulife Financial Corporation. We draw on more than a century of financial stewardship and the full resources of our parent company to serve individuals, institutions, and retirement plan members worldwide. Headquartered in Toronto, our leading capabilities in public and private markets are strengthened by an investment footprint that spans 19 geographies. We complement these capabilities by providing access to a network of unaffiliated asset managers from around the world. We’re committed to investing responsibly across our businesses. We develop innovative global frameworks for sustainable investing, collaboratively engage with companies in our securities portfolios, and maintain a high standard of stewardship where we own and operate assets, and we believe in supporting financial well-being through our workplace retirement plans. Today, plan sponsors around the world rely on our retirement plan administration and investment expertise to help their employees plan for, save for, and live a better retirement. Not all offerings are available in all jurisdictions. For additional information, please visit manulifeim.com.
Manulife Financial Corporation is a leading international financial services provider, helping people make their decisions easier and lives better. With our global headquarters in Toronto, Canada, we provide financial advice and insurance, operating as Manulife across Canada, Asia, and Europe, and primarily as John Hancock in the United States. Through Manulife Investment Management, the global brand for our Global Wealth and Asset Management segment, we serve individuals, institutions, and retirement plan members worldwide. At the end of 2021, we had more than 38,000 employees, over 119,000 agents, and thousands of distribution partners, serving over 33 million customers.
We trade as ‘MFC’ on the Toronto, New York, and the Philippine stock exchanges and under ‘945’ in Hong Kong. Not all offerings are available in all jurisdictions. For additional information, please visit manulife.com
SOURCE Manulife Investment Management
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