If you run a business that deals with customer data, you already know that this data is valuable and needs to be protected. This is the case in all industries, but in the financial services industry, it’s the law. Financial data in the wrong hands can lead to all kinds of trouble, both for customers and business owners. Theft of financial data has become a major problem thanks in part to the Internet, and regulators have seen fit to create laws to legislate the handling of data as a result.
The Gramm–Leach–Bliley Act
One of the most well-known efforts to protect financial data is the Gramm–Leach–Bliley Act. This law requires financial services companies to create controls that secure and limit the exposure of customer financial data to the public.
Compliance may mean investing in software that handles disaster recovery for financial services companies, but it will also mean financial services companies must take active steps to keep customer data from being accessed by unauthorized parties. Although software that handles disaster recovery for financial services companies doesn’t outright protect customer data, it can recover data that has been lost or stolen.
The Financial Industry Regulatory Authority
The Financial Industry Regulatory Authority (FINRA) is another regulatory body that financial services companies must pay attention to in terms of compliance. Unlike the Gramm-Leach-Bliley Act, FINRA compliance only applies to financial services companies that provide brokerage services and funding portals. FINRA is also not a government organization, but the financial services industry treats its regulations much the same as if it were.
Penalties for Violating Compliance
If a financial services company is found to have violated compliance regulations, penalties can range in severity. In addition to fines and fees, licensure may be suspended or revoked, and organizations can be censured in some instances.
Additionally, a financial services company that fails to adequately protect customer data may be open to lawsuits in civil court. This type of litigation is separate from any government or regulatory penalty, and it can further compound existing problems for non-compliant financial services companies.
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