Wall Street’s top regulator came under fire on Thursday over its cyber security and disclosure practices after admitting hackers had breached its database of corporate announcements in 2016 and may have used it for insider trading.
The breach involved the U.S. Securities and Exchange Commission’s EDGAR filing system, which houses market-moving information with millions of filings ranging from quarterly earnings to statements on acquisitions.
The SEC said on Wednesday evening it discovered in August that cyber criminals might have used a hack detected in 2016 to make illicit trades.
On Wednesday afternoon, SEC Chairman Jay Clayton gave members of Congress a “courtesy call” about the hack before it was announced publicly, said Representative Bill Huizenga, chairman of the U.S. House subcommittee that oversees the SEC, in a phone call.
“It’s hugely problematic and we’ve got to be serious about how we protect that information as a regulator,” Huizenga said.
The SEC disclosure came two weeks after credit-reporting company Equifax Inc said a breach had exposed sensitive personal of data up to 143 million U.S. customers. This followed last year’s cyber attack on SWIFT, the global bank messaging system.
It is particularly embarrassing for the SEC and its new boss Clayton, who has made tackling cyber crime one of the top enforcement issues.
“The chairman obviously recognizes the irony of the SEC potentially serving as the unwitting tipper in an insider trading scheme,” said John Reed Stark, president of a cyber consulting firm and a former SEC staff member.
The SEC has said it was investigating the source of the hack but did not say exactly when it happened or what sort of non-public data was retrieved. The agency said the attackers had exploited a weakness in a part of the EDGAR system and it had “promptly” fixed it.