How New SEC Guidance on Cybersecurity Risks Could Affect Your Business

by Barley Snyder
Contact

While new cybersecurity guidance from the U.S. Securities and Exchange Commission (SEC) only directly affects publicly traded companies, the trickle-down effects could touch a much larger swatch of businesses of any size.

The new interpretive guidance lays out more clear definitions of a “cybersecurity incident” and details cybersecurity disclosure obligations for public companies. However, those public companies likely will require second and third-party vendors to enter into contracts detailing their responsibilities before, during and after an incident, meaning all businesses that deal with publicly traded companies are going to need to familiarize themselves with this guidance.

A “cybersecurity incident” is defined in the guidance as “an occurrence that actually or potentially results in adverse consequences to … an information system or the information that the system processes, stores, or transmits and that may require a response action to mitigate the consequences.” The guidance introduces several innovations, including that it comes from the commission level, rather than the staff level like the 2011 guidance issued by the SEC’s Division of Corporate Finance. It also discusses the importance of having policies and procedures in place to identify cybersecurity incidents and to evaluate whether public disclosure is required. Related to these policies, the guidance requires procedures and controls for preventing insiders from trading the company’s securities after the breach but before public disclosure is made.

The guidance suggests public companies formulate methods for determining the impact of an incident on the company's business, financial condition and results of operations. Investors must be informed of material risks in a timely fashion in the event of an incident, but also kept current through required periodic reports. Procedures for evaluating the significance of a risk or incident are also critical. That might depend on the nature and extent of compromised information, possible harm to customer and vendor relationships and harm to finances and reputation. 

Companies that fall victim to cybersecurity incidents – on top of the significant costs of remediation – could face the additional costs of litigation and actions by state and federal authorities. Because of this guidance, publicly traded companies may require their business partners and vendors to have similar procedures in place for identifying risks and evaluating the significance of incidents. They may also seek contractual language that shifts the liability for an incident or the responsibility to remediate to the party responsible for the breach. Therefore, this guidance is instructive for all businesses.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Barley Snyder | Attorney Advertising

Written by:

Barley Snyder
Contact
more
less

Barley Snyder on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.