Janardhan N“In 2024, India witnessed a staggering 175% surge in phishing attacks within the BFSI sector, with over 135,000 incidents recorded in just the first half of the year alone.”
As merchant banking companies handle sensitive data such as investor details and financial transactions, even a minor breach can lead to severe financial and reputational damage.
In this blog, we break down what SEBI’s CSCRF for Merchant Bankers means, why it’s beneficial and the common challenges in compliance to stay secure and ahead of the curve.
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What is SEBI’s CSCRF for Merchant Bankers?
The Cybersecurity and Cyber Resilience Framework (CSCRF) is a new regulatory framework created by the Securities and Exchange Board of India (SEBI) to enhance the cybersecurity and cyber resilience of all market intermediaries.
Under this framework, SEBI’s CSCRF for Merchant Bankers requires each merchant banking company to adopt a structured, risk-based approach to cybersecurity. The framework is centred on the three key pillars:
Governance and Accountability: Merchant bankers are required to have board-level responsibility for cybersecurity.
A Chief Information Security Officer (CISO) who is responsible for operational security should be appointed to lead the implementation of policies and manage cyber incidents.
Resilience and Monitoring: Firms should identify and understand their critical systems, have controls in place to protect confidential or sensitive information, and continuously monitor threats through a Security Operations Centre (SOC).
Incident Response and Reporting: Merchant bankers should have proper processes in place to detect and respond to incidents, as well as report incidents to SEBI within the stated timeframes.
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Advantages for Merchant Bankers Complying with CSCRF
Complying with SEBI’s CSCRF is more than just regulatory compliance. The following are the benefits of SEBI CSCRF compliance for merchant bankers:
Improved Cyber Resilience: CSCRF compliance enables merchant bankers to recognise vulnerabilities sooner and implement preventive measures, ensuring business continuity in the event of a cyber attack.
Improved Client and Investor Trust: The majority of client decision-making in merchant banking centres around reputation. The CSCRF compliance helps boost confidence about your company’s data security and operational integrity.
Alignment with Regulatory Expectations: CSCRF compliance helps merchant bankers align with global standards like ISO 27001 and NIST, ensuring your organization is prepared for upcoming regulatory changes.
Improved Operational Efficiencies: SEBI CSCRF compliance streamlines processes for merchant bankers, reducing manual intervention and enhancing overall operational effectiveness.
Competitive Advantage: Adhering to SEBI CSCRF gives merchant bankers a distinct edge in the market, showcasing their commitment to security and regulatory excellence, attracting more clients.
Find out about the SEBI CSCRF penalties and the common mistakes companies make in achieving compliance standards.
Common Challenges Faced by Merchant Bankers in Maintaining CSCRF
The process of implementing and maintaining compliance with CSCRF is complex. Most merchant banking companies experience challenges such as:
- Lack of Resources: Many merchant bankers do not have specialised cybersecurity staff or advanced monitoring capabilities.
- Integration with Outdated Systems: Outdated IT systems, or third-party software, can complicate the implementation of the modern security controls mandated by SEBI’s CSCRF.
- Vendor Reliance: Merchant bankers often tend to rely on vendors for technology and operations services, which makes compliance with CSCRF challenging.
- Changes in Regulation: The evolving nature of regulatory requirements makes it difficult for merchant bankers to stay updated and ensure continuous compliance with SEBI CSCRF standards.
- Data Collection and Incident Reporting: Merchant bankers face challenges in gathering accurate data and maintaining real-time incident reporting, making it harder to meet SEBI CSCRF requirements effectively.
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How Merchant Banking Companies Can Ensure Compliance
Following is an expertly created step-by-step guide on ensuring compliance by merchant banking companies:
- Conduct a Gap Assessment
The first step is to undertake a baseline assessment to compare your current cybersecurity position against the requirements outlined in the CSCRF. This should help in determining whether there are any missing policies, controls or reporting mechanisms.
- Governance and Accountability
Hire a Chief Information Security Officer (CISO) or similar organisational senior official to ensure that there is a constant oversight of cyber risk operations.
- Technical Controls
You should try implementing the following important security measures to stay compliant with SEBI CSCRF:
- Multi-factor authentication
- Encryption of data in transit and at rest
- Endpoint protection and patch management
- Network segmentation and installing a firewall
- Leverage a Security Operations Centre (SOC)
Consider establishing your own Security Operations Centre (SOC) or accessing a SOC-as-a-service to monitor for threats and analyse logs.
- Incident Management and Recovery Planning
Document incident management processes, train teams on simulated breaches, and ensure that recovery processes are tested consistently.
- Review of Vendor & Third-Party Risk
Regularly assessing vendor and third-party risks ensures that merchant bankers maintain strong security practices and meet SEBI CSCRF compliance requirements.
- Ongoing Audits and Training
Continuous audits and employee training help merchant bankers stay aligned with SEBI CSCRF standards, improving security protocols and ensuring regulatory compliance.
Many stockbrokers still aren’t prepared for SEBI’s CSCRF guidelines. Discover what’s at stake if your firm isn’t compliant.
Conclusion
The SEBI CSCRF for Merchant Bankers marks a pivotal shift toward a more secure and resilient financial ecosystem. For merchant banking companies, compliance is both a regulatory responsibility and a strategic advantage.
Now is the high time to address the gaps and adopt a proactive approach to compliance.
Contact Mitigata today and enhance your company’s cyber resilience!
