In an era where cyber risk is almost daily news, governments have been working to develop tools to help businesses protect themselves against those who want to steal or misuse data.
Consumer class actions under California’s Song-Beverly Credit Card Act have been shaped by significant case law developments over the last few years. Friday’s Ninth Circuit decision in Sinibaldi v. Redbox is a decisive victory for retailers of rented goods which will allow them wide latitude to collect personal information, such as zip codes, when using credit cards as a form of security.
A recent judgment of the highest court in the European Union announced that search engines within the court’s jurisdiction must respond to “right to be forgotten” requests. This authoritative interpretation of the existing data protection laws may create significant issues for Internet intermediaries and exacerbate the differences between the European privacy-based “right to be forgotten” and the United States’ free-speech based “right to remember.” This judgment will have a significant impact not only on search engine companies and publishers, but also on many other industries, including financial services and life sciences, that need to maintain data on individuals for legitimate business reasons, often for lengthy periods.
On Tuesday, April 22, 2014, the U.S. Department of Health and Human Services Office for Civil Rights (“OCR”) announced that Concentra Health Services Inc. (“CHS”) and QCA Health Plan Inc. (“QCA”) have agreed to pay a total of $1,975,220, collectively, to resolve potential violations of the Health Insurance Portability and Accountability Act (“HIPAA”) Privacy and Security Rules stemming from the theft of unencrypted laptops. Specifically, CHS has agreed to pay $1,725,220, and QCA has agreed to pay $250,000, to OCR to settle potential HIPAA violations and will adopt corrective action plans to evidence their remediation of the potential violations. The clear message from both settlements is that OCR expects covered entities to encrypt mobile devices that store electronic Protected Health Information (“ePHI”).
SEC Launches Cybersecurity Examination Initiative – Promoting Cyber Preparedness
On April 15, 2014 the Securities and Exchange Commission (SEC) Office of Compliance Inspections and Examinations (OCIE) released a Risk Alert announcing that the agency will be examining 50 registered broker-dealers and investment advisers in order to assess cybersecurity preparedness in the securities industry.1 The announcement was accompanied by a sample request for information and documents. According to OCIE, the examinations will focus on “cybersecurity governance, identification and assessment of cybersecurity risks, protection of networks and information, risks associated with remote customer access and funds transfer requests, risks associated with vendors and other third parties, detection of unauthorized activity, and experiences with certain cybersecurity threats.”
The European Parliament has voted in a plenary session on March 12, 2014 to fully endorse the draft EU Data Protection Regulation (the Regulation) and the draft EU resolution calling for the immediate suspension of Safe Harbor (the Resolution), both of which were adopted previously by the European Parliament’s Civil Liberties Committee (the LIBE Committee).
According to the European Commission’s press release “today’s plenary vote means the position of the Parliament is now set in stone and will not change even if the composition of the Parliament changes following the European elections in May.”
Recent data breaches at retailers like Target have increased awareness about growing cybersecurity threats. Broker-dealers in particular need to reevaluate their own cybersecurity preparedness in light of several recent events:
- FINRA’s launch of a cybersecurity sweep, publicly announced on the FINRA website on February 6, 2014;
- The inclusion of cybersecurity as a priority in the SEC’s National Examination Program for 2014 and FINRA’s 2014 Annual Regulatory and Examination Priorities Letter;
- The White House’s February 12, 2014 release of the much-anticipated Framework for Improving Critical Infrastructure Cybersecurity; and
- An upcoming SEC public roundtable on cybersecurity issues, to be held in Washington, DC on March 26, 2014.
On December 26, 2013, Singapore’s Personal Data Protection Commission (the “Commission”) issued advisory guidelines on the “Do Not Call” Provisions (“DNC Guidelines”) of the Personal Data Protection Act 2012 (Act 26 of 2012) (“the Act”). The DNC Guidelines supplement the Commission’s earlier issued Advisory Guidelines1 on the Act. The DNC Provisions came fully into effect on January 2, 2014, and the DNC Guidelines serve to illustrate particular aspects of the DNC Provisions, though “they are not meant to exhaustively address every obligation in the Act.”2
On February 12, the White House released the widely anticipated Framework for Improving Critical Infrastructure Cybersecurity (“the Framework”). Developed pursuant to Executive Order 13636 (issued in February 2013), the Framework strongly encourages companies across the financial, communications, chemical, transportation, healthcare, energy, water, defense, food, agriculture, and other critical infrastructure sectors to implement and comply with its voluntary standards. The provisions set forth in the Framework may establish a new baseline for industry standard practices, and may impact or guide FTC enforcement actions and plaintiff data breach lawsuits.
On February 3, 2014, the U.S. Department of Health and Human Services (HHS) released a long-awaited final rule that amends the Clinical Laboratory Improvement Amendments of 1988 (CLIA) regulations and the Health Insurance Portability and Accountability Act of 1996 (HIPAA) privacy regulations to permit patients and their personal representatives to access laboratory test reports. By requiring expanded access, HHS rejects what some have characterized as “paternalistic” arguments that such reports are complicated and should be provided only through treating physicians. HHS justifies the rule as necessary to empower patients to take an active role in managing their health and healthcare. As anyone who has tried to interpret a laboratory test report can attest, whether the stated objectives of the new rule will be achieved has yet to be seen.