FINRA, the Financial Industry Regulatory Authority, released a new report that seeks to better understand the implications of cloud computing on the securities industry.
The report, Cloud Computing in the Securities Industry, was issued by FINRA’s Office of Financial Innovation (OFI), based on data from nearly 40 broker-dealer firms, cloud service providers, industry analysts, and technology consultants.
Cloud computing models are transforming how broker-dealers operate, often enhancing agility, efficiency, resiliency, and security within a firm’s operations. The report looks at the importance of these models and examines the relevant regulatory factors for maintaining investor protection and market integrity.
“This report is intended to serve as a tool for our member firms and other industry stakeholders by providing information to help them learn from the experiences of others. In addition, it provides useful insights regarding the challenges and benefits associated with implementation of a cloud computing framework, from both an operational and regulatory perspective,” Haimera Workie, head of the Office of Financial Innovation and Senior Director at FINRA, said. “As broker-dealers are at various stages in their cloud computing journey—from full or partial integration, to pilot projects or not at all—many firms are seeking to explore how these technologies can be used to personalize customer experiences, analyze larger amounts of data faster and increase their competitiveness in areas of rapid innovation.”
Among the key themes, the report found that the use of Software as a Service (SaaS) products was prevalent and that roll-outs of cloud infrastructure tended to be targeted, incremental, and iterative. In addition, it revealed that firms are focused heavily on governance, cloud security, and training and that organization and cultural changes often accompanied cloud adoption.
“As adoption of the cloud continues to grow, firms are finding clear benefits, but also potential challenges,” Workie added. “We encourage broker-dealers to conduct their own assessments of the implications of cloud computing, based on their business models and related use cases, and share those learnings with us.”
Among the regulatory factors that firms should consider are cybersecurity, data privacy, outsourcing/vendor management, business continuity, and recordkeeping.
FINRA is seeking feedback on the report, with comments requested by Oct. 16.