SEC 'fesses to security breach, says swiped info likely used for dodgy stock-market trading

EDGAR database a veritable goldmine of financial tips

The US Securities and Exchange Commission (SEC) has admitted that hackers broke into its corporate filling system last year.

As-yet unidentified miscreants may have profited from financial tip-offs and other data obtained after hacking into its online EDGAR filing system, the US government's financial trading watchdog admitted on Wednesday:

In August 2017, the Commission learned that an incident previously detected in 2016 may have provided the basis for illicit gain through trading. Specifically, a software vulnerability in the test filing component of the Commission's EDGAR system, which was patched promptly after discovery, was exploited and resulted in access to nonpublic information.

It is believed the intrusion did not result in unauthorized access to personally identifiable information, jeopardize the operations of the Commission, or result in systemic risk.

You may notice the regulator said one of its testing systems was hacked. Well, if you store real production on a test system, guess what: it's no longer a test system.

The EDGAR database hosts millions of formal filings submitted by businesses and other organizations: these documents range from quarterly earnings to profit-warning alerts and statements on planned mergers or acquisitions. For anyone able to peek inside the database and check out the submitted information shortly before it becomes public, it's a goldmine of insider information that can be exploited for financial gain.

The SEC said that although it patched the unspecified vulnerability in EDGAR soon after its discovery last year, it recently came to realize that the glitch may nonetheless have been leveraged for illicit gain. Meanwhile, it's reported the SEC had to patch five "critical" vulnerabilities in January this year.

The SEC has tightened up its security and launched an investigation in wake of the breach, which was publicly acknowledged on Wednesday.

The security flap is bound to raise questions about the SEC's cyber-resilience, not least because incoming chairman Jay Clayton has made cybersecurity a priority. Reuters reports that a recent Government Accountability Office review faulted the SEC for not always fully encrypting sensitive information and use of unsupported software among other failings.

The commission's disclosure follows hard on the heels of news of a major breach at credit reference agency Equifax that affected 143 million US consumers. Attacks on US financial institutions are rare but not unprecedented. For example, Nasdaq suffered a malware-related breach back in 2014.

The mechanism of the SEC breach remains unclear. Infosec experts suspect a targeted attack rather than an opportunistic raid.

Tony Rowan, chief security consultant at SentinelOne, commented: "It's clear that the SEC was specifically targeted and that this attack was not just some lucky win in a general campaign. Given the huge potential value of insider information about companies, their filings and up and coming share dealings, it's easy to see why they were attacked." ®