On April 16, 2019, the U.S. Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations (“OCIE”) issued a Risk Alert addressing all registered broker-dealers and investment advisers’ (together, “Firms”)[1] privacy-related obligations under Regulation S-P (“Reg S-P”).  The Risk Alert set out the most frequent Reg S-P deficiencies OCIE identified during examinations over the past two years, and encouraged registrants to review their written privacy policies and procedures as well as the consistency with which these policies and procedures have been implemented.  The Alert is the latest in a series of recent privacy and cybersecurity guidance documents issued by the SEC, including the February 2018 Commission Statement and Guidance on Public Company Cybersecurity Disclosures and October 2018 Report of Investigation on cyber-related frauds and public company accounting controls.

This Risk Alert is consistent with the SEC’s approach of seeking to influence the conduct of registrants by providing guidance on specific compliance issues, followed by Risk Alerts noting common exam deficiencies, prior to pursuing enforcement actions.  Investment advisers and broker-dealers should  take this as a prompt to review their relevant policies and procedures to ensure they are appropriate and being followed in practice.
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On April 9, 2019, an appellate court in Illinois held in Liu v. Four Seasons Hotel, Ltd.[1] that an employee’s allegations of violations of the state’s Biometric Information Privacy Act (“BIPA” or the “Act”) do not constitute allegations of “a wage or hour violation,” even where collection of biometric data is being used to monitor hours worked.  Coming on the heels of the Illinois Supreme Court’s decision in Rosenbach v. Six Flags Entertainment Corporation,[2] which held that plaintiffs are not required to allege harm beyond a “technical” violation of the Act in order to bring an action under BIPA, Liu demonstrates a developing pattern of recognition of broad privacy rights in Illinois courts.
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On April 10, 2019, the Department of Justice (“DOJ”) released a white paper titled Promoting Public Safety, Privacy, and the Rule of Law Around the World:  The Purpose and Impact of the CLOUD Act.  This white paper is the first official DOJ statement about the Clarifying Lawful Overseas Use of Data Act (“CLOUD Act”) and reflects the DOJ’s current perspective on its scope and implications.  Below we summarize the CLOUD Act and discuss the DOJ’s key observations.
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On March 20, 2019, in Frank v. Gaos, the Supreme Court remanded a case challenging Google’s practice of disclosing users’ search terms to third parties, directing the lower courts to address whether class plaintiffs had Article III standing to bring the privacy action in light of Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016).[1]  Frank v. Gaos was originally notable because it had been resolved by a cy pres-only class action settlement, which had been appealed by objecting class members as inconsistent with Federal Rule of Civil Procedure 23.  As part of the remand, the Court vacated the settlement without opining on its validity.
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On Friday, March 15, 2019, the U.S. Federal Trade Commission (“FTC”) issued its 2018 Privacy & Data Security Update (the “Update”) detailing its activities last year in seven “zones” of privacy and data security: enforcement, advocacy, rules, workshops, reports and surveys, consumer education and business guidance, and international engagement. 
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On 12 February 2019, the European Data Protection Board (“EDPB”)[1] adopted its first opinion on an “administrative arrangement,” which provides a new mechanism for the transfer of personal data between European Union (“EU”) financial supervisory authorities and securities agencies and their non-EU counterparts.

Under the EU’s General Data Protection Regulation 2016/679 (“GDPR”), personal data cannot be transferred from the European Economic Area (“EEA”) to a third country unless the European Commission has decided that such third country is “adequate” from a data protection laws perspective, or “appropriate safeguards” are in place to ensure that the treatment of personal data in the hands of the recipient reflects the GDPR’s high standards. Article 46 of the GDPR provides for various safeguarding options, including the possibility of “provisions to be inserted into administrative arrangements between public authorities or bodies which include enforceable and effective data subject rights.[2] No such “administrative arrangements” have been approved by the EDPB until now.
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In summer 2018, a new Indian Personal Data Protection Bill was released by a Committee of Experts formed under the Chairmanship of Justice B.N. Srikrishna (the “Bill”), accompanied by a report titled “A Free and Fair Digital Economy: Protecting Privacy, Empowering Indians.” After several months’ hiatus, reports are emerging of renewed impetus from India’s Ministry

On February 6, 2019, the German antitrust agency, the Federal Cartel Office (“FCO”), imposed limitations on Facebook’s current practice of collecting and processing user data and prohibited using the related terms of service.  After an almost three-year long investigation, the FCO found that some of Facebook’s business practices amounted to an abuse of a dominant position.  For the first time, the FCO based its abuse-of-dominance analysis also on whether the dominant company complied with the GDPR – throwing compliance with the GDPR into their competition law assessment.[1]
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On January 25, 2019, the Illinois Supreme Court held in Rosenbach v. Six Flags Entertainment Corporation that plaintiffs are not required to allege actual harm in order to seek damages against private entities under the state’s Biometric Information Privacy Act (BIPA).  BIPA regulates companies’ collection, retention, and disclosure of biometric identifiers.  It further provides a private right of action for persons “aggrieved” by a violation of the Act for recovery of liquidated damages, injunctive relief, attorneys’ fees, and costs.  By allowing suits for technical violations of BIPA’s notice and consent provision to go forward, the Rosenbach decision will likely encourage the filing of new cases under the Act and may influence the interpretation of data privacy laws in other states.
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The European Data Protection Board (“EDPB”)[1] adopted its highly anticipated guidelines on the territorial scope of the General Data Protection Regulation (“GDPR”) (the “Guidelines”), which are currently open for public consultation until January 18, 2019.

The extraterritorial application of the GDPR to entities located in non-EU countries marks a significant shift in the legal framework compared to the GDPR’s predecessor (Directive 95/46/EC).

The GDPR’s extraterritorial scope is based on two main criteria described in its Article 3:

  • the “establishment” criterion, according to which the GDPR applies where processing of personal data is undertaken by a person in the context of the activities of an establishment in the European Union regardless of whether the processing takes place in the European Union or not, and
  • the “targeting” criterion, according to which the GDPR applies where processing activities conducted by a person established outside the European Union relate to the offering of goods or services or the monitoring of behavior of data subjects in the European Union.

As a result of these two criteria, businesses which did not previously need to consider the applicability of EU data protection law to their processing activities may now be caught within the GDPR’s territorial scope. The Guidelines  are intended to bring clarity to non-EU businesses doing business with the EU, either directly or through “establishments”, which must undertake a careful assessment of their data processing activities in order to determine whether the GDPR applies. The full text of the Guidelines can be accessed here and their key features are summarized below.
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