Bloomberg Law: Privacy & Data Security brings you single-source access to the expertise of Bloomberg Law’s privacy and data security editorial team, contributing practitioners,...
By Yu-Tzu Chiu
The Hong Kong Securities and Futures Commission’s recent proposals on mitigating hacking risks in the securities industry are aimed at an upswing in cybersecurity incidents in internet trading systems in Hong Kong, technology attorneys told Bloomberg BNA.
The commission proposals include two-factor authentication for clients’ system login and prompt notification informing clients of certain activities in their internet trading accounts, the SFC said in a statement.
The Hong Kong commission proposed expanding the scope of cybersecurity-related regulatory principles and requirements to cover online trading of securities that aren’t listed or traded on an exchange. It also seeks to clarify that an internet-based trading facility may be accessed through a computer, mobile phone or other electronic device.
According to SFC, 27 cybersecurity incidents had been reported in Hong Kong over an 18-month period ending in March, and most involved hackers accessing clients’ internet-based trading accounts with securities brokers. The result was unauthorized trades totaling more than HK$110 million ($14.12 million).
The SFC proposals are “further evidence of increased regulatory focus on cybersecurity concerns,” Scott Thiel, technology partner at DLA Piper and head of the firm’s Hong Kong office, told Bloomberg BNA May 15.
“Hacking of internet trading accounts is the most serious cybersecurity risk faced by internet brokers in Hong Kong,” Ashley Alder, SFC’s chief executive officer, said in a statement.
Gary Cheung, vice chairman of Hong Kong Securities Association, told Bloomberg BNA May 16 that “cybersecurity prevents hackers from breaking into systems and should be implemented as a form of protection and defense enforcement.”
Mark Parsons, technology, media and telecommunications partner at Hogan Lovells International LLP in Hong Kong, said the commission proposal highlights the prevalence of a particular “pump and dump” scheme in which hackers gain unauthorized access to internet trading accounts and use the cash and securities to fund the purchase of penny stocks targeted by the hackers.
The hacked accounts are used to pump up the prices of penny stocks, while the hackers dump the stock at artificially inflated prices, causing significant losses to the hacked accounts, Parsons told Bloomberg BNA May 15.
Cheung said that “with so many aspects of a brokerage heavily reliant on online access, from account opening to accessing trading platforms, brokerages have to constantly be on the alert.”
Thiel said he was disappointed with the commission’s proposals. “It has a very narrow focus and provides little more than common sense guidance which we would expect sophisticated licensed entities to be doing in any event,” he said.
This regulatory approach in Hong Kong, which detractors see as piecemeal, differs from comprehensive regimes being adopted in other areas, including Singapore and China, where new, holistic cybersecurity laws are going live in June, he said.
There isn’t a mandatory breach notification under existing Hong Kong law, and no evidence Hong Kong’s Privacy Commissioner for Personal Data is considering adopting such measures, Thiel said. “On these issues, Hong Kong is behind other countries in the Asia-Pacific Region, such as Australia and the Philippines,” he said.
Hong Kong’s data protection authority did issue voluntary guidance in June 2010 on data breach notification. The guidance says that companies should “seriously consider” telling those impacted by a breach when there is a real risk of harm.
To contact the reporter on this story: Yu-Tzu Chiu in Taipei at firstname.lastname@example.org
To contact the editor responsible for this story: Donald Aplin at email@example.com
Text of the proposals are available at http://src.bna.com/oUt.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)