The consequences of a cybersecurity incident can be severe. The economic loss associated with an incident can often be compounded by reputational damage, loss of trade secrets, destruction of assets, operational impairment, lost revenue following the announcement of the cybersecurity incident and the expense of implementing remedial measures. The timing and content of any public communication about a suspected or confirmed cybersecurity incident can exacerbate this loss and have a significant impact on the trading price of the issuer’s securities. The disclosure considerations become even more complex when a company is subject to overlapping, and potentially conflicting, regulatory obligations in multiple jurisdictions, including the United States and the European Union (“EU”). This issue is now at the forefront with the EU’s new data security and privacy regime, the General Data Protection Regulation (“GDPR”), which became effective on May 25, 2018.
Rahul Mukhi’s practice focuses on criminal, securities, and other enforcement and regulatory matters as well as on complex commercial litigation.
Tomorrow, May 25, the European Union’s (“E.U.’s”) sweeping and much-awaited data security and privacy regulation known as the General Data Protection Regulation, or “GDPR,” will come into force. We have previously written a full analysis of the new requirements under the GDPR for companies subject to its jurisdiction.
Since the GDPR was formally approved in 2016, organizations around the world have devoted significant time and resources to preparing for the new law’s implementation. But while tomorrow is a deadline, it is also a start date—for compliance efforts that will require ongoing attention and adjustments in the months and years ahead. With this in mind, we have compiled the following tips and resources to aid companies in their ongoing efforts that will come after May 25: Continue Reading GDPR Compliance: Tips for What Comes <i>After</i> May 25
On April 24, 2018, Altaba, formerly known as Yahoo, entered into a settlement with the Securities and Exchange Commission (the “SEC”), pursuant to which Altaba agreed to pay $35 million to resolve allegations that Yahoo violated federal securities laws in connection with the disclosure of the 2014 data breach of its user database. The case represents the first time a public company has been charged by the SEC for failing to adequately disclose a cyber breach, an area that is expected to face continued heightened scrutiny as enforcement authorities and the public are increasingly focused on the actions taken by companies in response to such incidents. Altaba’s settlement with the SEC, coming on the heels of its agreement to pay $80 million to civil class action plaintiffs alleging similar disclosure violations, underscores the increasing potential legal exposure for companies based on failing to properly disclose cybersecurity risks and incidents.
Please click here to read the full alert memorandum.
On April 11, 2018, the Seventh Circuit reversed a district court’s dismissal, for failure to state a claim, of plaintiffs’ proposed class action arising out of a 2012 data breach affecting Barnes & Noble. In so holding, the court reaffirmed its view that allegations of data theft with a substantial risk of future harm are sufficient to assert an “injury” under Article III, even in the absence of allegations that the risk actually materialized. The Seventh Circuit further found that such injury may also satisfy the requisite damages allegations under federal pleading requirements. Continue Reading Seventh Circuit Expands Jurisprudence in Data Breach Cases
On April 18, 2018, government officials and cyber industry experts gathered in Washington, D.C., for the 2018 Incident Response Forum addressing legal and compliance challenges that arise following a data breach. At the conference, representatives from the SEC, DOJ, FTC, and other federal and state enforcement agencies discussed their top data breach-related concerns and enforcement priorities. Representatives spoke in their own capacity and were not making official agency statements, but their opinions can provide useful insight into agencies’ decision making processes and substantive views. Continue Reading Regulators and Law Enforcement Discuss Cyber Enforcement Priorities and Urge Cooperation Following Data Breaches
In a recent letter to leaders of the House Financial Services Committee, 31 state attorneys general urged Congress not to move forward with the Data Acquisition and Technology Accountability and Security Act, a federal breach notification bill, which aims to create a uniform set of reporting requirements for businesses nationwide. In their letter, the attorneys general argue that states have proven able enforcers of their citizens’ data privacy and security and, as such, the bill’s proposed preemption of state data breach and data security laws is unwarranted. Continue Reading State Attorneys General Warn Against Federal Data Breach Bill
Over recent months, numerous state regulators, including in Massachusetts, Texas, and New Jersey, have been exercising greater oversight of cryptocurrency businesses. On April 17, 2018, the office of the New York Attorney General Eric Schneiderman (“NYAG”) launched the Virtual Markets Integrity Initiative, which will seek information from various platforms that trade cryptocurrencies to better protect consumers. The initiative responds to concerns that cryptocurrency trading platforms may not provide consumers with the same information available from traditional exchanges. As part of the initiative, the NYAG’s Investor Protection Bureau sent thirteen major cryptocurrency trading platforms questionnaires relating to internal policies, controls, and best practices. The Bureau intends to consolidate and disseminate to consumers the information it receives. Continue Reading New York Attorney General Becomes Most Recent State Regulator To Foray Into Cryptocurrency Oversight
As of last month, when South Dakota and Alabama passed data breach notification laws, all 50 states (as well as the District of Columbia and several U.S. territories) now have data breach notification laws on their books. Continue Reading All 50 States Now Have Data Breach Notification Laws
On March 27, 2018, Massachusetts Secretary of State William Galvin announced that the state had ordered five firms to halt initial coin offerings (“ICOs”) on the grounds that the ICOs constituted unregistered offerings of securities but made no allegations of fraud. These orders follow a growing line of state enforcement actions aimed at ICOs.
This was not Massachusetts’s first foray into regulating ICOs. On January 17, 2018 the state filed a complaint alleging violations of securities and broker-dealer registration requirements against the company Caviar and its founder for an ICO that sought to create a “pooled investment fund with hedged exposure to crypto-assets and real estate debt.”
In September 2017, the SEC announced the creation of a new Cyber Unit within the Enforcement Division. Commenting on the launch of the new unit, Enforcement Division Co-Director Stephanie Avakian described “[c]yber-related threats and misconduct” as “among the greatest risks facing investors and the securities industry.” This alert memorandum takes stock of the SEC’s cyber enforcement actions since the Cyber Unit was formed as well as other recent SEC enforcement actions, guidelines, and public comments that shed light on potential future SEC cyber-enforcement in areas such as insider trading, cryptocurrencies and ICOs, cyber-related disclosures and policies, and cybersecurity safeguards.
Please click here to read the full alert memorandum.