Cybersecurity

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On January 8, 2018, the Financial Industry Regulatory Authority (“FINRA”) published its 2018 Regulatory and Examination Priorities Letter, which provides an overview of particular areas of regulatory focus in the upcoming year.  Under the category of operational and financial risks, FINRA specifically identifies cybersecurity as a high-priority area that member broker-dealer firms “may wish to consider as they identify opportunities to improve their compliance, supervisory and risk management programs” and commends the firms that have already devoted resources to this important area.  The letter notes that FINRA will assess the effectiveness of member firms’ cybersecurity programs at guarding sensitive information (including personally identifiable information) as well as such firms’ cybersecurity preparedness, technical defenses and resiliency measures.  FINRA also reminds member firms that they are required to have policies and procedures in place to evaluate whether a suspicious activity report must be filed with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) upon identification of a cybersecurity incident.  The letter also advises review of the 2017 Report on FINRA Examination Findings for further information about FINRA’s cybersecurity concerns and observations regarding effective cybersecurity practices.
Continue Reading FINRA Announces 2018 Priorities and Issues First-Ever Report on Examination Findings

In the wake of recent high-profile data breaches and in the absence of federal data protection legislation, states continue to propose new laws aimed at protecting the personal data of their residents.  On January 23, 2018, the Senate Judiciary Committee of South Dakota approved and forwarded for consideration by the full senate a bill that would require companies and individuals who operate and collect personal data in South Dakota to report data breaches affecting residents of the state within 60 days of discovery and, if more than 250 residents are affected by a data breach, to the Attorney General and consumer reporting agencies as well.  Following a number of comments received from state business associations, the Senate Judiciary Committee added to the proposed bill a threshold for risk of harm such that if, pursuant to “an appropriate investigation” and following notice to the Attorney General, a company reasonably determines that a breach is not likely to result in harm to an affected South Dakota resident, then notice to such resident is not required.  Failure to comply with the breach notification law could constitute a “deceptive act or practice” under state law enforceable by the Attorney General, who is also empowered under the law to recover civil damages not to exceed $10,000 per violation per day.  The bill will next be considered by the full senate and if passed, would leave Alabama as the sole U.S. state without a consumer data breach notification law.
Continue Reading South Dakota and Colorado are Latest States to Propose New Data Privacy Laws

In February 2018, the Supreme Court will hear argument in United States v. Microsoft Corporation on the issue of whether a U.S. email provider must comply with a warrant issued pursuant to Section 2703 of the Stored Communications Act (“SCA”) by making disclosure in the United States of electronic communications stored exclusively on servers at datacenters abroad.[1]  Recently the parties submitted briefing on the merits to the Court, and a number of amici weighed in to support Microsoft Corp. (“Microsoft”). [2]   Through more than twenty amicus briefs, major tech giants like Google, Apple, and Amazon, along with members of Congress, European lawmakers, European legal groups, and foreign sovereigns, expressed concern about the Government’s interpretation of the SCA. [3] As this interest demonstrates, the Court’s decision is expected to have far reaching implications for the treatment of foreign data protection laws in U.S. courts.
Continue Reading Accessing Servers Abroad: The Global Comity and Data Privacy Implications of United States v. Microsoft

On January 18, the Federal Trade Commission (“FTC”) released its Privacy & Data Security Update: 2017, describing its activities in the areas of consumer privacy and data security during the past year.

The report highlights the breadth of the FTC’s enforcement actions, both under Section 5 of the FTC Act, which prohibits unfair or deceptive…

Over the last year, the existential risk posed by cyberattacks and data security vulnerabilities has become one of the top concerns for boards of directors, management, government agencies, and the public.

This memo surveys some of the key cybersecurity and data privacy developments of 2017, including the major data breaches and cyberattacks, regulatory and legislative

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The new mandatory personal data breach notification regime introduced by the GDPR should be a key area of focus for organizations seeking to put in place GDPR compliance programs.  Personal data breaches are not only increasingly frequent and on the front pages, they are also one of the most likely causes of complaints being made by individuals against an organization and most likely subjects of investigation by data protection authorities (“DPAs”).  Regardless of whether an organization is at fault in allowing a breach to occur, its response will materially affect the impact of the breach on data subjects, and therefore the potential consequences for the organization itself.  Personal data breach management – of which breach notification forms a large part – should therefore be a priority area in any organization’s compliance efforts, including with respect to the GDPR. 
Continue Reading Notification of data breaches under the GDPR – 10 Frequently Asked Questions

On December 27, 2017, the New York Secretary of State sent a demand letter to Equifax Inc.’s interim CEO requesting additional information to aid the Division of Consumer Protection’s efforts “to investigate, mediate and/or mitigate identity theft complaints from consumers generally” as well as its investigation into the data breach disclosed by Equifax, Inc. on July 29, 2017, in which the personal data of approximately 143 million individuals (including 8.4 million New York residents) was compromised.  The letter demands that Equifax, Inc. provide a direct contact to respond to consumer concerns and requests information in 10 categories, including (a) a summary of the credit reporting agency’s plan (if any) to make affected New York residents “whole” following the breach, (b) a copy of the forensic review prepared by the cybersecurity firm Mandiant, (c) New York-specific data for those consumers whose credit card details or dispute documents containing personally identifiable information were exposed in the breach and (d) the number of children 15 years old and younger affected by the breach, nationwide as well as within New York, and the “long-term protection response” (if any) created for such affected children.  The demand was made pursuant to emergency regulations adopted by the Department of State in December 2017 that require credit reporting agencies to respond to requests made by the Division of Consumer Protection within 10 business days.  A company spokesperson for Equifax, Inc. confirmed on January 4, 2018 that the credit reporting agency intends to respond to the demand letter within the required time period.  This demand is the latest development in a plethora of investigations by various law enforcement agencies and regulators into the breach and follows requests for information from all 50 state attorneys general as well as a subpoena from the New York Department of Financial Services (“DFS”).
Continue Reading New York Regulator Demands Additional Information from Equifax

A recent enforcement action by the Massachusetts’s Attorney General Office (“Mass. AG”) serves as a stark reminder of how important it is to have robust data security policies and practices in all respects, including with respect to company equipment and locally stored data.
Continue Reading Massachusetts Attorney General Settles For Data Breach Over Stolen Laptop—Sign of Increased Enforcement Scrutiny?

Since the adoption of the General Data Protection Regulation (GDPR) in 2016, considerable attention has focused on the vastly increased scope of potential administrative fines, and even more attention is being paid to the issue with the GDPR becoming effective on May 25, 2018.  In this post, we summarize the key fining provisions, and analyze the recent relevant guidance on this issue from the Article 29 Working Party (an advisory group consisting of representatives from national data protection authorities together with the European Commission).
Continue Reading Administrative Fines Under the GDPR