Did Companies Fail to Disclose Being Affected by SolarWinds Breach?

The US Securities and Exchange Commission (SEC) has reportedly opened a probe into whether some companies that were affected by the SolarWinds breach failed to disclose that fact.

News organization Reuters reported on Monday that the agency sent letters to several investment firms and publicly listed companies last week, seeking voluntary information from them regarding whether they had been victims of the SolarWinds breach. The SEC requires organizations to disclose any event, including security breaches, that could affect share prices.

The SEC is also looking into whether companies that were affected by the breach had experienced any kind of lapse of internal security controls. In addition, the agency is examining the policies that some of these organizations had for protecting consumer data, according to Reuters, quoting two unnamed sources that it said were close to the probe.

Organizations that respond to the SEC letter and voluntarily provide details of any breach that they might have experienced because of the SolarWinds intrusion will not face enforcement action, Reuters said, quoting its sources.

What remains unclear if whether any action will be taken against organizations that refuse to respond or provide details of any compromise they might have experienced. It's also not clear why the SEC believes the companies to which it sent the investigation letters were affected by the breach at SolarWinds. The SEC did not immediately respond to a Dark Reading email seeking more information on the reported probe.

The breach at SolarWinds — which began early 2019 but was only discovered in December 2020 — resulted in malware being distributed to nearly 18,000 of the company's customers worldwide. A few of them, including nine US federal agencies and numerous private companies and tech firms such as FireEye and Microsoft, were later targeted for further compromise and data theft.

US authorities have blamed Russia's foreign intelligence service (SVR) for the whole campaign, which they have said was conducted for cyber-espionage purposes. Some security experts believe the number of organizations that were impacted by the breach is likely larger than what is known.

SolarWinds itself has described the breach as starting in January 2019 or nearly two years before the company discovered the intrusion — and that only after FireEye notified it about a potential compromise. The company says the attack began with threat actors gaining access to its software development environment and planting malware called "Sunspot" into a source-code file. It's unclear yet how the threat actors might have gained initial access to the company's build environment. The attackers later used Sunspot to insert a Trojan called Sunburst/Solarigate into builds of a SolarWinds network management product called Orion. Those software updates were sent out to thousands of SolarWinds customers.

The SolarWinds attack has focused considerable attention on supply chain security especially within federal government agencies. In a report following the SolarWinds incident, the Government Accountability Office (GAO) described none of the 23 federal civilian agencies as having fully implemented best practices for managing risks within the supply chain for information and communication technologies. According to the GAO, just five agencies have an enterprisewide supply chain risk management (SCRM) strategy and just five have established executive oversight over the function. Not one agency, though, has an actual process for conducting agencywide assessments of supply chain risks. The GAO has made some 145 recommendations to all federal civilian agencies on how to better address supply chain risks.