SEC Regulation SCI - Systems Compliance and Integrity

To meet the sec regulation sci - systems compliance and integrity requirement, an SCI entity must maintain and enforce written policies and procedures that keep its SCI systems sufficiently capable, secure, resilient, available, and accurate to sustain operations and avoid material market or investor harm. You operationalize this by defining SCI systems, setting measurable engineering controls, and proving fast incident assessment and SEC notification.

Key takeaways:

• Regulation SCI is a written-controls requirement for specific market infrastructure entities, focused on SCI systems’ capacity, integrity, resiliency, availability, and security (17 CFR 242.1000 et seq.).
• Your weakest point in practice is often SCI event detection and “immediate” SEC notification decisioning, especially for cyber intrusions (17 CFR 242.1000 et seq.).
• Subsidiaries that are SCI entities can face independent liability for notification failures, even under a shared parent and shared security operations (Release No. 34-100206).

Regulation SCI is an SEC technology controls regime for a narrow universe of critical market infrastructure providers (exchanges, certain ATSs, clearing agencies, plan processors). If you are in scope, the rule expects more than “we have an information security program.” You need a mapped inventory of “SCI systems,” written policies and procedures that are “reasonably designed” to keep those systems within acceptable operational risk limits, and day-to-day execution evidence.

Operationalizing this quickly starts with scoping and governance: define what counts as an SCI system, establish control ownership across engineering and security teams, and connect your incident response program to the Regulation SCI notification workflow. The May 2024 ICE/NYSE matter shows where teams fail: delayed escalation and delayed SEC notification after a cyber intrusion, plus confusion about which legal entity must notify (Release No. 34-100206; 2024-63).

This page gives requirement-level implementation guidance you can turn into tickets, runbooks, and exam-ready evidence: what to build, who must do it, what to retain, and where audits typically find gaps. (Educational only; coordinate with counsel for firm-specific legal interpretations.)

Requirement in plain English (what the SEC expects)

Regulation SCI requires you to write down, operate, and enforce policies and procedures that keep your SCI systems:

• adequately sized (capacity),
• correct (integrity),
• able to recover and continue (resiliency, availability),
• and protected against security threats (security),

so you can maintain operational capability and support fair and orderly markets without creating material adverse effects (17 CFR 242.1000 et seq.).

Two operator translations matter:

1. “Reasonably designed” means engineered controls + governance. You are expected to set design standards, monitoring, change controls, testing, and incident processes that match your market role and system criticality.
2. You must be able to prove execution. Written policies are necessary, but insufficient. Auditors will follow the chain: system inventory → control design → tickets/logs/test results → incident records → notification decisions.

Who it applies to (and how to confirm scope)

In-scope entities (high-level)

Regulation SCI applies to SCI entities defined in the rule, generally including:

• Exchanges
• Clearing agencies (and exempt clearing agencies)
• Plan processors
• Certain alternative trading systems (ATSs) that meet SCI thresholds under the rule definition
  (17 CFR 242.1000 et seq.)

Operational contexts that trigger real work

You should treat this as a market-critical production systems regime. It is most relevant to:

• matching engines, order routing, execution, market data distribution,
• clearing/settlement processing,
• surveillance and regulatory reporting systems where malfunction can impact market integrity,
• identity, network, and security infrastructure that supports SCI systems (because intrusions and disruptions can become SCI events).

Fast scoping checklist (CCO/GRC lead version)

• Confirm whether your legal entity is an SCI entity under the rule (17 CFR 242.1000 et seq.).
• List candidate “SCI systems” and have Technology + Compliance agree in writing.
• Identify shared services and third parties (MSSP, cloud, telecom, SSO, endpoint tooling) that could affect SCI system security/availability.

Regulatory text

Core requirement (excerpt): “SCI entities must establish, maintain, and enforce written policies and procedures reasonably designed to ensure that their SCI systems have levels of capacity, integrity, resiliency, availability, and security adequate to maintain their operational capability…” (17 CFR 242.1000 et seq.)

Operator meaning: what you must do

• Establish: create written, approved policies/procedures that cover the SCI system lifecycle (design, build, test, deploy, operate, monitor, incident response).
• Maintain: keep them current as architecture, threats, and dependencies change; update after incidents and tests.
• Enforce: run the controls and require adherence (gated releases, access reviews, incident SLAs, testing sign-offs, exception handling with approvals).
• Ensure adequate levels: define what “adequate” means for each SCI system via SLOs/SLAs, RTO/RPO targets, performance thresholds, and security baselines tied to system criticality.

What you actually need to do (step-by-step)

Step 1 — Define and register SCI systems (scope control)

1. Build an SCI system inventory with: system name, business function, environment, dependencies, data flows, and owning legal entity.
2. Classify each SCI system by criticality (market impact), then map required controls to that classification.
3. Establish an SCI “system owner” role per system (engineering) and an accountable executive (technology) with compliance oversight.

Deliverable: SCI Systems Register + ownership matrix.

Step 2 — Write the SCI policies/procedures as runnable operating manuals

At minimum, make sure your documentation covers:

• Capacity management: performance testing approach, thresholds, scaling triggers, and monitoring.
• Integrity controls: data validation, reconciliation, controls to prevent/catch corruption, and rollback procedures.
• Resiliency/availability: redundancy design, failover procedures, DR strategy, backup/restore testing approach.
• Security: access control, segmentation, vulnerability management, security monitoring, secure SDLC.
• Change management: pre-deploy approvals, testing gates, emergency changes, post-implementation review.

Keep these documents short enough to be used during incidents. Long policy binders do not help the on-call engineer at 2 a.m.

Deliverable: Regulation SCI Policy + a set of procedures/runbooks tied to the SCI inventory.

Step 3 — Embed control gates in engineering and operations (enforcement)

Turn “written procedures” into enforced workflow:

• CI/CD gates for required tests and approvals on SCI systems.
• Access requests routed through an approval workflow and logged.
• Monitoring with alert thresholds and on-call rotation for SCI systems.
• Formal exception process: who can grant, how long, compensating controls, and a closure requirement.

Evidence tip: Auditors trust system logs and tickets more than narrative memos.

Step 4 — Build the SCI event decision + notification workflow (don’t wait for certainty)

Regulation SCI includes notification obligations for SCI events, including systems intrusions. The ICE/NYSE action focused on delayed notification after a cyber intrusion (Release No. 34-100206; 2024-63).

Implement a decision workflow that:

1. Detects potential SCI events from SOC alerts, incident tickets, third-party notices, and operations alarms.
2. Forces a rapid “SCI event?” determination with named decision-makers and alternates.
3. Triggers immediate SEC notification through the SEC’s Regulation SCI notifications system for SCI events (17 CFR 242.1000 et seq.).
4. Captures the basis for any “no/de minimis impact” determination that affects updates (17 CFR 242.1000 et seq.).

Critical nuance (entity-by-entity): The SEC charged a parent and multiple affiliates in the ICE/NYSE matter; treat each SCI entity as having its own duty to assess and notify, even if security operations are centralized (Release No. 34-100206).

Step 5 — Validate with testing and management review

• Test incident scenarios that include: malware on corporate network with potential path to SCI systems, compromised credentials, third-party connectivity compromise.
• Run tabletop exercises with Compliance, Legal, Technology, and the SOC.
• Track corrective actions to closure and update procedures after every significant incident.

Required evidence and artifacts to retain (exam-ready)

Use this list as your standing evidence binder:

• SCI Systems Register (system inventory, ownership, criticality) (17 CFR 242.1000 et seq.)
• Regulation SCI policies and procedures with approval history and revision control (17 CFR 242.1000 et seq.)
• Capacity/performance test plans and results for SCI systems
• Monitoring/alerting configuration and on-call schedules for SCI services
• Change management artifacts: release approvals, test evidence, emergency change logs
• Access control evidence: privileged access lists, approvals, and periodic reviews
• Incident records mapped to SCI event criteria, including investigation notes
• SEC notification records submitted through the Regulation SCI notifications system (17 CFR 242.1000 et seq.)
• De minimis impact determinations with supporting analysis when used (17 CFR 242.1000 et seq.)
• Post-incident reviews and remediation tracking to closure

If you manage shared infrastructure, retain the mapping that shows which shared components support which SCI systems.

Common exam/audit questions and hangups

Expect questions like:

• “Show me your definition of SCI systems and how you keep it current.” (17 CFR 242.1000 et seq.)
• “Where is ‘adequate capacity’ defined for this SCI system, and how do you monitor it?”
• “Prove you enforce change controls on SCI systems. What happens in an emergency change?”
• “Walk through the last security incident that touched shared infrastructure. Why was it or wasn’t it an SCI event?” (Release No. 34-100206)
• “Who can decide to notify the SEC, and what is the escalation path if that person is unavailable?” (17 CFR 242.1000 et seq.)
• “Show notification timing and internal timestamps from detection to decision to notify.” (Release No. 34-100206)

Hangup pattern: teams can explain their IR process but cannot show the SCI-specific decision and notification layer.

Frequent implementation mistakes (and how to avoid them)

1. Treating SCI as an “InfoSec policy” project. Fix: anchor on SCI systems and operational capability, not just security documentation (17 CFR 242.1000 et seq.).
2. No single SCI systems inventory. Fix: one register, one owner per system, quarterly attestation by engineering owners.
3. Central SOC, unclear legal-entity notification duties. Fix: entity-specific notification RACI; require each SCI entity to sign off on the determination (Release No. 34-100206).
4. Waiting to notify until the incident is fully understood. Fix: implement a “notify on reasonable basis” approach aligned to “immediate” notification expectations for SCI events (17 CFR 242.1000 et seq.; 2024-63).
5. De minimis determinations made verbally. Fix: write a short template that captures criteria, impact analysis, approver, and timestamps (17 CFR 242.1000 et seq.).

Public enforcement cases

Intercontinental Exchange, Inc. and nine affiliates including NYSE (cyber intrusion notification)

• Source: In the Matter of Intercontinental Exchange, Inc. and Nine Affiliates Including New York Stock Exchange (Release No. 34-100206)
• Public SEC messaging: SEC newsroom release tied to the matter (2024-63)
• What operators should learn: The SEC focused on timeliness and process breakdowns around cyber intrusion assessment and notification. Build a workflow that produces fast, documented SCI-event determinations and entity-specific notification execution (Release No. 34-100206; 2024-63).

Enforcement context and risk implications

Regulation SCI enforcement is infrequent in public data, but the ICE/NYSE matter shows a clear risk pattern: delayed notification after a cyber intrusion can become the enforcement hook even when incident response work is underway (Release No. 34-100206; 2024-63). Your operational risk is highest where responsibilities cross teams: third-party notifications, corporate network incidents that might affect SCI systems, and legal-entity ambiguity.

If you want one exam-defensible sentence to drive operations: “We notify based on a documented reasonable-basis determination and do not wait for complete root cause.”

Practical 30/60/90-day execution plan

First 30 days (triage and control spine)

• Confirm SCI entity scope and identify all SCI systems in a single register (17 CFR 242.1000 et seq.).
• Define the SCI event escalation RACI, including backup decision-makers and entity-by-entity notification duties (Release No. 34-100206).
• Draft the notification decision template (SCI event? rationale, timestamps, approvers, de minimis analysis).

Days 31–60 (write procedures + turn them into workflow)

• Publish the SCI policies/procedures covering capacity, integrity, resiliency, availability, security, and change management (17 CFR 242.1000 et seq.).
• Implement workflow enforcement: release gates, access approval logging, incident ticket tagging for “potential SCI event.”
• Run a tabletop exercise for a cyber intrusion scenario that begins with a third-party call/email and includes SEC notification decisioning (Release No. 34-100206; 2024-63).

Days 61–90 (prove execution + close gaps)

• Collect evidence from real operational artifacts: monitoring alerts, changes, access reviews, incident tickets.
• Perform a targeted internal audit of one high-criticality SCI system end-to-end (inventory → controls → tests → incidents).
• Remediate: update runbooks, add missing alert thresholds, fix ambiguous ownership, and train the on-call roster.

Tooling note (where Daydream fits)

Most failures here are evidence and coordination failures, not lack of intent. Daydream can help you keep the SCI systems register, control mapping, notification decision records, and exam request responses in one place, so your proof stays consistent across Technology, Security, and Compliance.

Frequently Asked Questions

How do I know whether we are an SCI entity?

Regulation SCI applies to “SCI entities” as defined in the rule, generally major market infrastructure providers like exchanges, certain ATSs, clearing agencies, and plan processors (17 CFR 242.1000 et seq.). Confirm scope with counsel and document your determination.

What counts as an “SCI system” for practical implementation?

Start with systems that support trading, order handling, market data, clearing/settlement, and related operational functions whose failure could impact fair and orderly markets (17 CFR 242.1000 et seq.). Include shared infrastructure if its compromise or outage can impair those systems.

Do we need to notify the SEC if we suspect a cyber intrusion but don’t yet know impact?

Regulation SCI requires immediate notification of SCI events through the Regulation SCI notifications system (17 CFR 242.1000 et seq.). The ICE/NYSE matter shows the SEC’s focus on timeliness for cyber intrusion-related SCI events (Release No. 34-100206; 2024-63).

Can our parent company handle SEC notification for all subsidiaries?

Do not assume that. In the ICE/NYSE matter, multiple affiliates were charged, which signals entity-specific accountability risk (Release No. 34-100206). Build an entity-by-entity notification RACI even if incident response is centralized.

What should a “de minimis impact” determination look like?

Keep it short and defensible: the facts known at the time, why impact is assessed as none/de minimis, what systems were reviewed, who approved, and timestamps (17 CFR 242.1000 et seq.). Store it with the incident record so you can reproduce the decision under exam pressure.

What evidence will an examiner trust most?

Time-stamped operational records: incident tickets, SOC alerts, change approvals, monitoring dashboards, and the notification submission record (17 CFR 242.1000 et seq.). Policies matter, but enforcement is proven through workflow artifacts.