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GAO Says Wall St. Must Bolster Defenses Against Attacks

February 13, 2003|From Reuters

Bolstering Wall Street's defenses against possible terrorist attacks should be a higher priority for financial markets and regulators, congressional investigators said Wednesday.

The General Accounting Office, the investigative arm of Congress, released a report that found 15 vital financial organizations have improved physical and information security systems "to reduce the risk of disruption from future attacks."

But the GAO added: "Many of the organizations still had limitations in their preparedness that increased their risk of being disrupted."

When three jetliners slammed into the World Trade Center towers and the Pentagon, U.S. financial markets in lower Manhattan shut down. Bond markets reopened Sept. 14 and the stock markets Sept. 17.

The House Financial Services Committee afterward asked the GAO to investigate progress being made in preparing the world's largest securities markets for future attacks.

The GAO said it studied seven exchanges, three clearing and trade processing organizations, three electronic communications networks and two payment system processors.

The report found nine of the 15 organizations had no business continuity plan in case of attack. Four had no backup facilities and six had backup facilities less than 10 miles from their primary sites, the report said.

The GAO recommended the Securities and Exchange Commission work with the industry to "ensure that U.S. securities markets are better prepared to recover from future disasters."

Banking and securities regulators have moved to prevent future disasters from causing widespread settlement and payment defaults. But the GAO said: "They have not taken important actions that would better ensure that trading in critical U.S. financial markets could resume in a fair and orderly way."

The SEC, the Federal Reserve and the Office of the Comptroller of the Currency are working with the industry on limited recovery plans focused on clearing and settlement, the GAO said.

But no advanced plans have emerged for trading activities or for the stock exchanges, it said.

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