Here’s something most RIAs don’t realize: even if your IT provider is the one that drops the ball, the SEC still holds you accountable.
You Can Outsource Tasks—Not Liability
That’s right. If your cloud vendor, CRM host, or backup provider mishandles client data, the SEC sees that as your responsibility.
Your clients trust you—not your service providers. And when regulators come knocking, they’re not going to chase down your vendors. They’re coming to you.
What Does That Mean for You?
You need to take vendor oversight seriously. That means:
- Risk Assessments: Before hiring a vendor, understand what data they’ll handle and how they’ll protect it.
- Due Diligence: Ask for SOC 2 reports, cybersecurity policies, or breach history.
- Contracts With Teeth: Make sure your agreements include:
- Clear security expectations
- Breach notification requirements (within 72 hours)
- Cooperation during investigations
- Ongoing Monitoring: Reassess vendor risk annually. Update contracts as needed.
Create a Vendor Oversight File
Build a spreadsheet that tracks:
- Each vendor
- What client data they touch
- When they were last reviewed
- Security docs received (e.g., SOC 2, ISO 27001, etc.)
Having this on hand won’t just help with audits—it’s smart business.
The Takeaway
You’re still responsible. But with the right oversight, documentation, and contracts, you can manage that risk like a pro.
Don’t wait for a vendor mistake to become your next audit nightmare. Tighten up your vendor oversight—because your reputation’s on the line.
