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Cybersecurity


NEW SEC RULE REQUIRES PUBLIC COMPANIES TO DISCLOSE CYBERSECURITY BREACHES IN 4
DAYS

The Associated Press
July 26, 2023 4:04 pm
3 min read
      

WASHINGTON (AP) — The Securities and Exchange Commission adopted rules Wednesday
to require public companies to disclose within four days all cybersecurity
breaches that could affect their bottom lines. Delays will be permitted if
immediate disclosure poses serious national security or public safety risks.

The new rules, passed by a 3-2 vote along party lines, also require publicly
traded companies to annually disclose information on their cybersecurity risk
management and executive expertise in the field....

READ MORE

WASHINGTON (AP) — The Securities and Exchange Commission adopted rules Wednesday
to require public companies to disclose within four days all cybersecurity
breaches that could affect their bottom lines. Delays will be permitted if
immediate disclosure poses serious national security or public safety risks.

The new rules, passed by a 3-2 vote along party lines, also require publicly
traded companies to annually disclose information on their cybersecurity risk
management and executive expertise in the field. The idea is to protect
investors.

Breach disclosures can be delayed if the U.S. Attorney General determines they
would “pose a substantial risk to national security or public safety” and
notifies the SEC in writing. Only under extraordinary circumstances could that
delay be extended beyond 60 days.

“Whether a company loses a factory in a fire — or millions of files in a
cybersecurity incident — it may be material to investors,” SEC Chair Gary
Gensler said in a statement, noting the current inconsistency in disclosures.

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The rules will put “more transparency into an otherwise opaque but growing risk”
and may spur improvements in cyber defenses — though potentially posing a bigger
challenge for smaller companies with limited resources, Lesley Ritter, senior VP
at Moody’s Investors Service, said in a statement.

Technically, the clock doesn’t start ticking on the four-day window for
reporting until companies have determined a breach is material.

One of the dissenting Republican commissioners, Hester Peirce, complained that
the new requirements overstep the SEC’s authority and “seem designed to better
meet the needs of would-be hackers” – who could benefit from detailed info on
how companies manage cyberrisk.

As well, Peirce said in a statement, the temptation for the SEC to “micromanage”
company operations will only grow.



A leading figure in cybersecurity, Tenable CEO Amit Yoran, heartily welcomed the
new rule.

“For a long time, the largest and most powerful U.S. companies have treated
cybersecurity as a nice-to-have, not a must have. Now, it’s abundantly clear
that corporate leaders must elevate cybersecurity within their organizations,”
he said in a statement.

The rules were first proposed in March 2022, when the SEC determined that
breaches of corporate networks posed an escalating risk as their digitization of
operations and remote work increased — and the cost to investors from
cybersecurity incidents rose.

While some critical infrastructure operators and all health care providers must
by law report breaches, no federal breach disclosure law exists.

        Read more: Cybersecurity

In a new report published by IBM, researchers found organizations now pay an
average of $4.5 million to deal with breaches — a 15% increase over the past
three years. The Ponemon Institute researchers also found that impacted
businesses typically pass the costs on to consumers, who may themselves also be
victims with personal information stolen in a breach.

The rule’s passage also comes amid slow-moving, often cryptic disclosures — some
through SEC filings — from a major data breach affecting hundreds of
organizations caused by the so-called supply chain hack by Russian
cybercriminals of a widely used file transfer program, MOVEit. The breach has
impacted multiple universities, major pensions funds, U.S. government agencies,
more than 9 million motorists in Oregon and Louisiana and companies including
the BBC, British Airways, Ernst & Young and PricewaterhouseCoopers.

Many victims of the MOVEit breach were quick to point out that they were failed
by a third-party application. The new SEC rule encompasses third-party apps and
notes how companies have increasingly relied on outside cloud services for data
management and storage.

Copyright © 2023 The Associated Press. All rights reserved. This website is not
intended for users located within the European Economic Area.


      
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