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Understanding IT Compliance For the Financial Industry: Why is it Important?

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Understanding IT Compliance For the Financial Industry: Why is it Important?

Financial institutions increasingly face the challenge of staying compliant with constantly changing IT regulations. To protect their customers' data, financial institutions must keep up with the most recent compliance rules and best practices.

In this article, we at Skyriver IT will provide an in-depth look into the importance of IT compliance for financial institutions. We will also offer insight into how financial advisors can establish IT compliance and share best IT compliance practices.

What is IT Compliance?

IT compliance refers to an organization's adherence to laws, regulations, and industry standards related to using software to safeguard client data. To maintain software security and acceptability for business use, all relevant criteria must be met by adhering to industry regulations, customers' agreement terms, security frameworks, and governmental policies.

Compliance requirements guarantee that organizations use the software as intended. Also, they can safeguard their operations and clients' security while enhancing service availability and reliability. Different industries have their own specific compliance requirements that businesses are required to meet.

For example, healthcare institutions must comply with regulations that protect the confidentiality and privacy of their patients when employing digital health services or keeping medical information electronically.

Similarly, businesses in the financial and e-commerce sectors must follow rules to securely handle and transmit client payment information. The size of the company and the clients it serves may also affect other compliance requirements.

Why Do Financial Firms Need IT Compliance?

Financial advisors require IT compliance to ensure the security of their business, maintain operational efficiency, avoid costly fines, and protect against potential threats that could disrupt their operations.

By requesting sensitive customer data, such as Social Security numbers or credit card information, companies are responsible for protecting that data. With IT compliance, firms can access the right tools to protect their customers’ data and stay ahead of both internal and external IT risks.

Here are some of the most important reasons why it's important to comply with IT:

Improves Capability for Data Management

Financial advisors must have a solid understanding of IT compliance requirements. This ensures that their client's sensitive data is kept secure and private. With the rise of cybercrime, financial advisors are even more responsible for protecting their customers' data and meeting any compliance requirements.

IT compliance provides a comprehensive approach to managing data, giving them better control and visibility over their clients' data. A financial advisor can develop strategies to quickly and securely access information by assessing current data systems. This helps organizations remain compliant with regulations and enhance their data management capabilities.

With effective data management, financial advisors can meet compliance requirements. They can also uncover new marketing possibilities that can benefit the firm.

Creates a Safe Business Culture and Creates Corporate Responsibility

Financial advisors manage and keep their client's sensitive financial info safe. With the increasing number of cyber threats, IT compliance is now more important than ever for financial advisors. This is to protect their client's data and remain compliant with applicable regulations.

Financial advisors can create a safety culture in their businesses and promote corporate responsibility. They can do this by implementing cutting-edge security compliance processes that meet or surpass the relevant security regulations and standards.

This ensures that all collected sensitive client information is adequately protected. If a cyberattack or data breach happens, financial advisors must tell their clients about it and keep their trust and reduce downtime.

Builds Trust in Business and Industry

IT compliance is essential for protecting your customers and your business. Customers always want to know that their data is secure when using a service. By following IT security guidelines, financial advisors can protect their businesses and customers from online risks. This assures people that their information is safe and can help build a strong reputation for reliability over time.

IT compliance protects customers from data breaches. It can also lead to better financial results for the company. Financial advisors can create a trustworthy relationship with customers and other stakeholders by ensuring that the business follows security regulations.

Successful Business Results

Adhering to IT compliance guidelines can ensure the use of best practices, reducing the risk of security issues. It also shows stakeholders that you are committed to a standard created specifically for your sector, building trust and confidence. This can also lead to consistent processes and procedures for more efficient operations.

Bad Business Repercussions

Failing to adhere to IT compliance standards can be disastrous for cash advisory firms. Here are some potential risks: 

Legal and Financial Consequences: Non-compliance often leads to legal and financial fines. This results in high cost, damages to a company's reputation, and a potential loss of trust from clients.

Security Lapses: Non-compliance also increases the risk of security lapses, such as data breaches or cyber-attacks. Ultimately it exposes sensitive financial data and further damages the company's reputation and income.

How To Establish IT Compliance?

Financial institutions must ensure their IT systems and processes meet legal and regulatory requirements. Establishing and maintaining IT compliance policies and procedures is essential to achieving this. Here are some tips for financial institutions to help them establish effective IT compliance:

Policy and Controls Documentation

First, document all applicable policies and controls that will be in place to ensure compliance. Make sure to inform all relevant staff of the policy principles and provide detailed documentation on all relevant standards, processes, and controls. It's also important to have a platform in place.

This is to handle the complexity of IT controls and procedures and keep track of any gaps or incidents. Additionally, organizations must keep their documentation up to date and conduct regular self-assessments to validate and implement their compliance policies.

Identify the Person in Charge

To ensure successful IT compliance, financial institutions must identify a person in charge who has the authority and control to implement the compliance measures. This person should be held accountable by the board and executives. They should also have clear channels of communication to ensure that compliance efforts are effectively communicated to all levels of the organization.

Additionally, this person should have the capability to provide regular updates on the status of the compliance program and how he monitors it. They should also continually review and update the program as needed.

Prioritize Access Control and Employee Screening

Financial institutions must prioritize access control and employee screening in order to establish IT compliance. Before granting any access to sensitive information, it is essential to conduct thorough background checks to ensure the safety of corporate operations and information access rights.

Identity management and provisioning are useful tools to help managers grant users access to the appropriate resources and rights, depending on job function, role, and responsibility. It’s important to implement access restrictions to prevent potential unauthorized access.

Additionally, businesses should exercise caution when transferring power to ensure that any access granted is only used for the intended purpose.

Place a Focus on Communication and Training

A financial institution can establish IT compliance by focusing on both communication and training. Establishing a training and communication program is essential. This ensures that those with access to regulated processes and classified information understand the laws and regulations that must be followed.

This program should also emphasize the importance of following compliance measures and demonstrate the benefits of doing so. By doing this, it will not only help ensure that all staff and personnel are fully aware of the correct compliance measures to follow. It can also help to prevent incidents of corporate misconduct, fraud, and liability issues.

In the long run, these programs can raise public knowledge of compliance measures while also emphasizing the value of adhering to such regulations.

Plan For IT Control Monitoring and Auditing

Planning and implementing a comprehensive IT compliance strategy is essential for any financial institution. Frequent monitoring and auditing of IT systems should be conducted to ensure that all controls are in place and properly working.

Companies should create policies to support incorporating authorization for control monitoring and evaluation. They also allow for swift action when approved modifications are not implemented. Monitoring and auditing can be done either manually or automatically. It depends on the organization's size and the IT systems' complexity.

Additionally, organizations should have a procedure in place for updating and revising the IT compliance strategy and for regularly testing the effectiveness of the controls.

Enforce Policies Consistently

A successful compliance program must be built on the foundation of consistent enforcement of policies. By ensuring that all internal controls are consistently applied across the business, processes, and systems, financial institutions can be certain that any control breaches will be identified and dealt with appropriately.

By consistently enforcing policies, the organization can implement and apply the necessary internal controls throughout the entire business operations, processes, and systems. This allows them to identify and deal with potential control breaches quickly and effectively.

Doing so will help strengthen the overall compliance program and create a culture where unethical and non-compliant behavior is unacceptable. Furthermore, this consistent enforcement will ensure that the organization remains compliant with relevant laws, regulations, and industry standards.

Incident Response and Prevention

Financial institutions must establish robust incident response and prevention processes to ensure the highest levels of IT compliance. These processes should include regular audits to detect any violations and control gaps, as well as measures to address and rectify any issues that are identified swiftly.

Additionally, proper training and education should be provided to staff. This is to ensure they understand the importance of compliance and the implications of non-compliance. Learning from past failures is also essential to ensure that the same mistakes are not repeated.

By establishing a strong compliance program and culture, financial institutions can ensure that control deficiencies and compliance breaches are minimized and that any losses or harm caused by infractions can be avoided.

Best IT Compliance Practices For Financial Advisors

Financial advisors are responsible for ensuring that their advice complies with the latest industry laws. This obligation extends to all areas of their practice, including IT compliance. Here we talk about what strategies companies can use to gain competitive advantage:

Stop Advising

Financial advisers must adhere to compliance regulations to tailor their advice to each client. They should avoid providing advice to large audiences. They should use in-person consultations to gain insight into an individual's unique financial objectives, risk tolerance, and other criteria.

Avoid Adoption

In order to avoid compliance risks, financial advisers must be vigilant about not adopting information or viewpoints from unverified sources. Simply retweeting a message on Twitter, leaving a comment on a website, or linking to an article without verifying the accuracy of the information can have serious consequences. Financial advisers need to promote only compliant information to stay within compliance regulations.

No Solicitation

Strict compliance regulations bind financial advisers by prohibiting mass media from contacting potential customers or prospects. This helps prevent any knowledge gaps between advisers and customers and ensures a level playing field. As such, the use of well-known "call-to-action" marketing components such as "learn more" or "sign up now" buttons is prohibited. 

Persistent hoarding

To comply with regulatory standards, financial advisers must save almost all records of professional correspondence for a minimum of five years. An advisor should store these records in both digital and physical forms and do so systematically for easy retrieval. This requirement includes white papers and client tweets, which can serve as evidence in the event of disputes.

Direct, not Dictate

Financial advisors should strive to provide beneficial advice and counsel to their clients while avoiding making decisions on their behalf. To ensure this, the best IT compliance practices for financial advisors are to direct rather than dictate. By providing information and resources to clients, advisors can help them make informed decisions without imposing their own opinion.


After reading this article, we hope you now have a better understanding of IT compliance for financial institutions, why these are important, and how you can establish IT compliance. If you are a financial advisor and need IT consultation and efficient IT solutions regarding financial services, contact us today.

Skyriver IT is one of the best IT consulting companies. We have a team of experts whose expertise is in cybersecurity for financial institutions, IT compliance, and cloud computing, and we can also help you meet banking cyber security standards.


What are the consequences of non-compliance for financial advisors?

The consequences of non-compliance for financial advisors can include fines, legal penalties, loss of business, damage to reputation, and loss of clients.

How often should financial advisors review their IT compliance policies?

Financial advisors should review their IT compliance policies regularly, at least once a year or whenever there is a significant change in their business or the regulatory environment.

What should financial advisors do in the event of a data breach?

In the event of a data breach, financial advisors should follow their incident response plan, which should include notifying affected clients, law enforcement, and regulatory authorities. Financial advisors should also conduct a thorough investigation to determine the cause of the breach and take steps to prevent future incidents.

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