In an Australian first, the Federal Court has found Australian Financial Services licensee, RI Advice, breached its licence obligations to act efficiently and fairly when it failed to have adequate risk management systems to manage its cybersecurity risks.
The finding comes after a significant number of cyber incidents occurred at authorised representatives of RI Advice between June 2014 and May 2020. In one of the incidents, an unknown malicious agent obtained, through a brute force attack, unauthorised access to an authorised representative's file server from December 2017 to April 2018 before being detected, resulting in the potential compromise of confidential and sensitive personal information of several thousand clients and other persons.
ASIC Deputy Chair Sarah Court said 'These cyber-attacks were significant events that allowed third parties to gain unauthorised access to sensitive personal information. It is imperative for all entities, including licensees, to have adequate cybersecurity systems in place to protect against unauthorised access.
'ASIC strongly encourages all entities to follow the advice of the Australian Cyber Security Centre and adopt an enhanced cybersecurity position to improve cyber resilience in light of the heightened cyber-threat environment,' concluded Ms Court.
RI Advice has taken steps to address cybersecurity risk across its authorised representative network. In addition to the declaration of contravention, the Court ordered RI Advice to engage a cybersecurity expert to identify and implement what, if any, further measures are necessary to adequately manage cybersecurity risks across RI Advice's authorised representative network.
When handing down judgment, Her Honour Justice Rofe made clear that cybersecurity should be front of mind for all licensees, stating, 'Cybersecurity risk forms a significant risk connected with the conduct of the business and provision of financial services. It is not possible to reduce cybersecurity risk to zero, but it is possible to materially reduce cybersecurity risk through adequate cybersecurity documentation and controls to an acceptable level.'
Her Honour further stated that the declarations ordered in the matter should serve to record the Court's disapproval of the conduct and should deter other Australian Financial Services licensees from engaging in similar conduct.
RI Advice has been ordered to pay $750,000 towards ASIC's costs.
The orders were made by consent after ASIC and RI Advice agreed to resolve the proceedings.
