In a move that may set a record for hacking chutzpah, a cyber ransom gang has filed a complaint with the SEC reporting that a company they hacked had failed to report the incident to the SEC within the time required by the agency’s new cybersecurity disclosure guidelines. The gang apparently filed the complaint after the hacked company failed to respond to the hackers’ ransom demand. The hacking incident and the SEC report were first reported in a November 15, 2023, post on the DataBreaches.net site, and further detailed in a November 15, 2023, post on the BleepingComputer.com site.Continue Reading Hackers Complain to SEC Company They Hacked Failed to Disclose the Incident
In what the Wall Street Journal called a “milestone” in the SEC’s efforts to address public companies’ cybersecurity disclosures, the SEC has filed a civil enforcement action against software company SolarWinds and its Chief Information Security Officer, Timothy Brown. The agency alleges that the company repeatedly misled investors by understating the company’s cyber vulnerabilities and the ability of hackers to penetrate the company’s systems. According to statements from agency officials, the action is intended to send a message about cybersecurity disclosures and disclosure controls. A copy of the SEC’s complaint can be found here. A copy of the SEC’s October 30, 2023, press release about the action can be found here.Continue Reading SEC Files Cybersecurity Disclosure Suit Against SolarWinds and Exec
On July 26, 2023, a divided SEC adopted, by a 3-2 vote, final rules for cybersecurity disclosures. The final rules are based on proposed rules the agency first introduced in March 2022. The rules require companies to disclose material cybersecurity incidents they experience, and also to disclose on an annual basis material information regarding their cybersecurity risk management and governance. The rules will have a significant impact on reporting companies’ disclosure practices and could present a challenge for some companies. A copy of the final cybersecurity disclosure rules can be found here. The SEC’s July 26, 2023, press release about the final cybersecurity disclosure rules can be found here. The SEC’s two-page fact sheet about the new rules can be found here.Continue Reading SEC Adopts Final Cybersecurity Disclosure Rules
On March 9, 2022, the SEC finally released its long-anticipated updated cybersecurity disclosure requirements. The proposed rules, inclusive of specifications both for incident reporting and for risk management and governance disclosure, were adopted by a 3-1 vote and are now subject to a public reporting period. The new rules, which the Commission’s press release says are “designed to better inform investors about a registrant’s risk management, strategy, and governance and to provide timely notification of material cybersecurity incidents,” underscore the Commission’s emphasis on cybersecurity reporting and disclosure issues.
The SEC’s March 9, 2022 press release about the proposed new rules can be found here. The Commission’s two-page “fact sheet” about the new rules can be found here. The Commission’s 129-page proposing release can be found here. Cydney Posner’s March 9, 2022 post on the Cooley law firm’s PubCo blog about the proposed rules can be found here.
Continue Reading SEC Proposes New Rules for Cybersecurity Disclosure and Incident Reporting Rules
The filing of data breach and other cybersecurity incident-related shareholder derivative lawsuits against corporate boards is nothing new; plaintiffs’ lawyers have been filing these kinds of claims now for several years. However, in recent months, the plaintiffs’ lawyers have shown an increasing inclination to file these claims based on allegations of breach of the duty of oversight. The latest example of this type of claim is the shareholder derivative suit filed this week against the board of T-Mobile USA. Although the plaintiff’s complaint does not expressly use the words “breach of the duty of oversight” or refer to “Caremark duties,” the complaint does refer to the board’s alleged “failure to monitor” and to the board’s alleged failure “to heed red flags” – the very kind of allegations that are at the heart of breach of the duty of oversight claims. A copy of the plaintiff’s complaint in the November 29, 2021 lawsuit can be found here.
Continue Reading Data Breach-Related Derivative Suit Filed Against T-Mobile USA Board
As I have noted in prior posts on this site, cybersecurity issues can lead to D&O claims. In the following guest post, Rachel Soich, FCAS, MAAA. Consulting Actuary at Milliman, considers steps that companies can take to avoid cyber-related D&O costs. A prior version of this article previously was published in Milliman Insight. I would like to thank Rachel for allowing me to publish her article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Rachel’s article.
Continue Reading Guest Post: Three Ways to Avoid Cyber-Related D&O Costs
When companies are hit with cybersecurity incidents, class action privacy litigation often follows. However, claimants in these kinds of cases face a threshold challenge of showing they have suffered a sufficient “injury in fact” to establish that they have standing to assert their claims. The following guest post, written by Paul Ferrillo, Kristine Argentine, Emily Dorner, and Alexandra Drury of the Seyfarth Shaw law firm, provides a survey of the current state of play for the standing requirements in this type of litigation. I would like to thank the authors for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.
Continue Reading Guest Post: First There was Litigation; And Then There Was Standing
In the agency’s latest move underscoring its emphasis on cybersecurity disclosure, the SEC has filed settled charges against the U.K. educational publishing and services company Pearson plc, alleging that the company misled investors about a 2018 data breach. The company, which neither admitted nor denied the charges, agreed to pay a $1 million civil money penalty. The administrative enforcement action, while not the first of its type, does highlight the agency’s heightened focus on cybersecurity disclosure issues. The agency’s August 16, 2021 cease and desist order can be found here. The agency’s August 16, 2021 press release about the order can be found here. Pearson’s statement about the proceeding can be found here.
Continue Reading SEC Charges Company Over Misleading Cybersecurity-Related Disclosures
In the following guest post, John Cheffers analyzes the data relating to cybersecurity incidents at companies listed on Nasdaq and New York Stock Exchange. John is Associate Counsel and Director of Research at Watchdog Research. I would like to thank John for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is John’s article.
Continue Reading Guest Post: Cybersecurity Incident and Litigation Review 2021
The business pages have been full in recent months with tales of cyber extortion and ransomware. In an effort to try to explain these developments, some commentators have suggested that the availability of ransomware coverage under cyber insurance is a cause of the problem. In the following guest post, Paul Ferrillo takes on the question of the role of cyber insurance availability in the proliferation of ransomware incidents. Paul is a partner in the securities litigation group at the Seyfarth Shaw law firm. I would like to thank Paul for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Paul’s article.
Continue Reading Cybersecurity Insurance Did NOT Cause the Ransomware Plague