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SEC needs to up its cybersecurity game, Clayton tells Senate

More cybersecurity breaches of markets should be expected, SEC Chairman Jay Clayton told a Senate oversight panel Tuesday.

"We must recognize there will be breaches … We are under constant attack from high-level actors," Mr. Clayton told the Senate Committee on Banking, Housing and Urban Affairs, which oversees the Securities and Exchange Commission.

On Sept. 21, Mr. Clayton said he learned in August that the SEC's EDGAR filing system was breached in 2016 and may have led to illicit trading on non-public information. The breach was tracked to a custom software defect in EDGAR's test filing component. Mr. Clayton said the breach did not result in unauthorized access to personally identifiable information, or present systemic risk, but that it may take "substantial time" to understand the extent and impact of the intrusion. The SEC's inspector general is also investigating the breach, which was reported to the Department of Homeland Security.

On Monday, the SEC announced an enforcement cyber unit and a task force focusing on retail investors that have been in the planning stages for months. The cyber unit, to be run by Robert A. Cohen, co-chief of the enforcement division's market abuse unit, will look for cyber-related threats to trading platforms and other critical market infrastructure, market manipulation schemes involving false information spread through electronic and social media, hacking to obtain material non-public information, and intrusions into retail brokerage accounts, among other activities.

Mr. Clayton told the Senate panel that individual firms spend far more resources on cybersecurity, and that the agency needs additional resources. "We need to up our game," he said.

In his first oversight hearing since taking over the agency in May, Mr. Clayton said that along with cybersecurity, his priorities are protecting retail investors and markets and facilitating capital formation. Pressed by several senators on the Department of Labor's fiduciary rule, Mr. Clayton said that working with the DOL to harmonize the rule "is a priority for me."