Changes to data breach notification laws continue to pop up across the country this Spring. The latest comes from a new law signed by Arizona Governor Doug Ducey that amends the state’s data breach standards. Although much of the Arizona law has remained the same, the new law updates a few key provisions, including the definition of personal information, the requirements for the content of the data breach notice, the timing of notice, and the capping of penalties. (more…)
*This article first appeared in In-House Defense Quarterly on April 3, 2018
The growing volume and severity of cyber-attacks directed against public companies has caught the attention of federal regulators and investors. Recent guidance from the Securities and Exchange Commission (SEC) on disclosure and enforcement actions by the Federal Trade Commission (FTC) make clear that cybersecurity is no longer a niche topic, but a concern significant enough to warrant the oversight of corporate boards of directors. A high-profile cyber incident may cause substantial financial and reputational losses to an organization, including the disruption of corporate business processes, destruction or theft of critical data assets, loss of goodwill, and shareholder and consumer litigation. More and more, directors are viewing cyber-risk under the broader umbrella of corporate strategy and searching for ways to help mitigate that risk. Increasingly, thought leaders, professional organizations, and government agencies are beginning to provide answers. (more…)
And then there were none. Alabama has joined the ranks of the other 49 states with breach notification requirements by enacting the Alabama Data Breach Notification Act of 2018 (the “Act”). The Act, which was signed into law by Alabama Governor, Kay Ivey on March 28, 2018, requires companies to provide Alabama residents with notification of a breach within 45 days of discovery. Notification is triggered by a determination of a breach that poses a risk of harm to impacted individuals. Alabama exempts from the definition of breach the good faith acquisition of sensitive personally identifying information by an employee or agent of a covered entity, unless the information is used for a purpose unrelated to the business or subject to further unauthorized use. Companies must notify the state AG in the same period if the breach requires notification of more than 1,000 “individuals” (defined as Alabama residents whose “sensitive personally identifiable information” was, or is reasonably believed to have been, accessed as a result of the breach). In addition, if more than 1,000 individuals are notified at a single time, companies must provide notice to consumer reporting agencies “without unreasonable delay.” Third parties who are contracted to process sensitive personally identifiable information must provide notice of a breach to the owner of that information within ten days of discovering the breach. Notice from a third party then triggers the 45-day notification period for the covered entity.
On March 21, Governor Daugaard of South Dakota signed SB 62, making South Dakota the 49th state to enact a data breach notification statute (leaving only Alabama without a state data breach law). South Dakota’s attorney general issued a statement after the law was signed, observing that the connected economy comes with “an increased risk of theft and fraud,” and “we need the tools to combat these breaches and thefts of our personal information.” (more…)
On February 7, 2018, the Office of Compliance Inspections and Examinations (OCIE) of the U.S. Securities and Exchange Commission (the Commission) released its annual National Exam Program Examination Priorities (Exam Priorities).1 As has been widely reported, the Exam Priorities’ general focus areas include:
- retail investors
- compliance and risks in critical market infrastructure
- oversight of the Financial Industry Regulatory Authority (FINRA) and Municipal Securities Rulemaking Board (MSRB)
- anti-money laundering (AML) programs
The majority of these Exam Priorities are not surprising because they reflect the Commission’s continued focus on retail investors, conflicts of interest, fee disclosure, cybersecurity, cryptocurrency and AML programs.2 The Exam Priorities can serve as a roadmap for firms to assess their policies, procedures and compliance programs, and to prepare for OCIE exams. This post outlines and elaborates on each of the Exam Priorities. (more…)
On Jan. 3, the United States Court of Appeals for the Sixth Circuit issued a decision that effectively required a company to turn over materials relating to a privileged forensic data breach investigation because, the court concluded, the company had implicitly waived privilege when it disclosed certain of the forensic firm’s conclusions in response to a discovery request. The Sixth Circuit’s decision emphasizes the need for caution by litigants wishing to raise a defense that relies on privileged investigations and reports, including third-party forensic reports, or otherwise disclosing the conclusions of such investigations and reports. (more…)
On January 8, the FTC announced a settlement with VTech (a maker of electronic children’s toys) for violations of COPPA, adding to the regulatory activity mounting in the last few years around the Internet of Toys. The company agreed to pay $650,000 to settle allegations that its Kid Connect app and its Learning Lodge platform collected personal information from almost 3,000,000 children without providing direct notice and obtaining their parent or guardian’s consent. (more…)
This past year was marked by ever more significant data breaches, growing cybersecurity regulatory requirements at the state and federal levels and continued challenges in harmonizing international privacy and cybersecurity regulations. We expect each of these trends to continue in 2018.
As we begin this New Year, here is list of the top 10 privacy and cybersecurity issues for 2018: (more…)
*This article first appeared in Law360 on December 18, 2017.
For well over a year, defense contractors have had New Year’s Eve 2017 circled on their calendars, and not because they love the “auld lang syne” and a good glass of champagne. (Or at least not only for those reasons.) Dec. 31, 2017, is the deadline for when covered contractors must comply with the U.S. Department of Defense’s new Defense Federal Acquisition Regulation Supplement (DFARS) cybersecurity requirements. This holiday season contractors are thus making their lists and checking them twice in order to ensure that they will be compliant by the end of the year. And this intense focus is well warranted. The DOD is deeply committed to protecting its information, and the requirements are an important step in that regard.
But for all of the focus on Dec. 31, contractors must also remember that the focus on compliance must remain into the New Year — and beyond. New technologies will emerge. Contractors will buy new systems and hire new employees. And all the while, internal security teams will be trying to stay a step ahead of hackers and “white hat” security researchers. In short, despite contractors’ best efforts, gaps may be identified at any time. Moreover, these gaps may carry with them real consequences — not only the possibility of contract termination, but also the risk of costly and disruptive False Claims Act investigations and lawsuits, with the specter of treble damages, and the possibility of suspension and debarment, lurking. It is thus crucial that contractors continue to be vigilant about the regulations, and take steps to enable them to demonstrate their vigilance and compliance, in order to best position themselves to avoid liability.
On October 26, 2017, the U.S. Department of Treasury released a 176-page Report examining the current regulatory framework for asset management and insurance industries. The Report, titled A Financial System That Creates Economic Opportunities: Asset Management and Insurance, identifies laws and regulations that are inconsistent with the Trump Administration’s Core Principles for financial regulation as set forth in Executive Order 13772 (Feb. 3, 2017), and makes recommendations to ensure alignment. For data privacy and security, the Report commented on the Insurance Data Security Model Law (the “Model Law”) adopted by the National Association of Insurance Commissioners’ (the “NAIC”) on October 24, 2017 (for more information on the development of the Model Law, see our prior coverage). The Model Law attempts to set a baseline for cybersecurity, although it depends on legislative action on the state level. (more…)