SEC Proposes Sweeping New Rules on Use of Data Analytics by Broker-Dealers and Investment Advisers

On July 26, 2023, the U.S. Securities and Exchange Commission (SEC or Commission) proposed new rules for broker-dealers (Proposed Rule 15(1)-2) and investment advisers (Proposed Rule 211(h)(2)-4) on the use of predictive data analytics (PDA) and PDA-like technologies in any interactions with investors.1 However, as discussed below, the scope of a “covered technology” subject to the rules is much broader than what most observers would consider to constitute predictive data analytics. The proposal would require that anytime a broker-dealer or investment adviser uses a “covered technology” in connection with engaging or communicating with an investor (including exercising investment discretion on behalf of an investor), the broker-dealer or investment adviser must evaluate that technology for conflicts of interest and eliminate or neutralize those conflicts of interest. The proposed rules would apply even if the interaction with the investor does not rise to the level of a “recommendation.”


U.S. SEC Public Company Cybersecurity Disclosure Regulation Finalized With Swift Effective Date

On July 26, 2023, the U.S. Securities and Exchange Commission finalized its rule on Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure by Public Companies (the Final Rule), which will become effective 30 days following publication in the Federal Register. The Final Rule applies to all public companies subject to the reporting requirements of the Securities Exchange Act of 1934, including foreign private issuers, smaller reporting companies, and business development companies, and will require disclosure of material cybersecurity incidents on Form 8-K and Form 20-F and periodic disclosure of cybersecurity risk management, strategy, and governance in annual reports on Form 10-K and Form 20-F.


SEC Delays Enactment of Cyber Rules Related to Investment Adviser and Public Companies to October 2023, Updates Timeline to April 2024 for Recently Proposed Cybersecurity Rules

On June 13, 2023, the Office of Management and Budget released its Spring 2023 Unified Agenda of Regulatory and Deregulatory Actions, which includes updates on Securities and Exchange Commission (“SEC”) proposed rules.  The SEC pushed back  its estimate for the final action date to October 2023 for its proposed cybersecurity rules related to public companies, as well as for its investment advisers and funds proposal.  Notably, the SEC’s timelines are typically estimates for implementation, and the proposed rules could be introduced sooner or later than these dates. However, the updated timeline indicates that the SEC is prioritizing finalizing its cybersecurity rules related to public companies and investment advisers and funds.


EU Moving Closer to an AI Act – Key Areas of Impact for Life Sciences/MedTech Companies

The European Union is moving closer to adopting the first major legislation to horizontally regulate artificial intelligence. Today, the European Parliament (Parliament) reached a provisional agreement on its internal position on the draft Artificial Intelligence Regulation (AI Act). The text will be adopted by Parliament committees in the coming weeks and by the Parliament plenary in June. The plenary adoption will trigger the next legislative step of trilogue negotiations with the European Council to agree on a final text. Once adopted, according to the text, the AI Act will become applicable 24 months after its entry into force (or 36 months according to the Council’s position), which is currently expected in the second half of 2025, at the earliest.


U.S. Securities and Exchange Commission Proposes Three Rules Related to Cybersecurity, Reopens Comment for One Rule

On March 15, 2023, the U.S. Securities and Exchange Commission (SEC) proposed three rules related to cybersecurity and the protection of consumer information and reopened the comment period for a proposed cybersecurity rule for investment advisers and funds. This significant action would impose new cybersecurity requirements for several SEC-registered entities, including with respect to these entities’ policies, incident response and notification procedures, and cybersecurity risk management. This Sidley commentary and analysis discusses the key features of each proposal, including new requirements and differences among each of the proposals.


FCC Proposes Updated Data Breach Reporting Requirements, Comment Period Ongoing

On January 6, 2023, the Federal Communications Commission (the Commission) released a unanimously adopted Notice of Proposed Rulemaking, “In the Matter of Data Breach Reporting Requirements” (Proposed Rule).  The Commission sought comments through February 22, 2023 on the Proposed Rule which will update its current data breach reporting rule. Reply comments are due on or before March 24, 2023.


Meru Data Podcast Features Sidley Associate Lauren Kitces

Sidley associate Lauren Kitces was featured on Simplify For Success, a podcast series presented by Meru Data and hosted by Priya Keshav. Lauren discussed FTC’s proposed rulemaking regarding data privacy and data security, and shared her thoughts on how to prepare for the FTC enforcement.

Off to the Races: Comment Period for CPRA Proposed Regulations Begins

On Friday, July 8th, the California Privacy Protection Agency (CalPPA) began the formal rulemaking process to adopt proposed regulations to implement California Privacy Rights Act (CPRA) amendments to the California Consumer Privacy Act (CCPA).  The initial written comment period will end on August 23, 2022 at 5:00 pm Pacific Time.  To cap off the initial comment period, CalPPA will hold a public hearing on August 24th and 25th, during which the agency will accept oral comments and then close the first comment period.

The rulemaking process will take some time. Indeed, it is possible this initial rulemaking round will not be complete until after Thanksgiving.  Revisions to the first draft are expected through likely multiple notice and comment rounds, in addition to deliberations by the CalPPA Board in noticed public meetings. Moreover, once the agency process is complete, the Office of Administrative Law (OAL) will review the proposed regulations to ensure they are consistent with the statute.


Data Regulation Ramps Up in Europe: The AI, Data, and Data Governance Acts

Join Sidley and OneTrust DataGuidance for Part two of the “Data Regulation Ramps Up in Europe” webinar series, where our panel will discuss legislative proposals, including the Artificial Intelligence Act, the Data Act, and the Data Governance Act (DGA). (more…)

China Data Law Update: Certification Rules and Draft Standard Contract Are Issued

As the year approaches its halfway point, Chinese government accelerates the legislation for cross-border data transfers. (more…)