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Report: SEC internal memo flags risk in filing database

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Report: SEC internal memo flags risk in filing database

A vulnerability in the U.S. SEC's already criticized corporate filing database, EDGAR, could cause the system to collapse, raising concerns over the facility's ability to safeguard data from cyber attacks, Reuters reported, citing an internal document.

The regulator reportedly said in a Sept. 22 memo that its EDGAR database, containing financial reports from U.S. public companies and mutual funds, could be at risk of "denial of service" attacks, a type of cyber intrusion that floods a network and forces it to close.

The discovery came when the SEC was testing EDGAR's ability to absorb monthly and annual financial filings that will be required under new rules adopted in 2016.

The weakness could cause a system shutdown even by an unintentional error by a company. This comes after the SEC's admission in September that hackers had breached the EDGAR database in 2016.

New rules adopted in 2016 require asset managers to file monthly and annual reports about their portfolio holdings to ensure their liquidity position to the investors in case of a market crisis. The industry has since redoubled its calls for SEC Chairman Jay Clayton to delay the data-reporting rules, set to go into effect in June 2018.

"Clearly, the SEC should postpone implementation of its data-reporting rule until the security of those systems is thoroughly tested and assessed by independent third parties," Mike McNamee, chief public communications officer of the Investment Company Institute, told Reuters.

An SEC spokesman declined to comment on Reuters' report.