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2/22/2018
02:22 PM
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SEC: Companies Must Disclose More Info on Cybersecurity Attacks & Risks

New agency guidance statement also says company officials, execs can't trade stocks if they have unannounced information on a security breach at the company.

The Securities and Exchange Commission (SEC) has issued updated guidance for public companies that calls for providing investors more information on their cybersecurity incidents - as well as risks - in a more timely fashion.

In the so called interpretive guidance statement released yesterday, the commission also said corporate officers, directors, and "other corporate insiders" cannot trade shares if they have unpublicized knowledge of a security incident at the company.

"Public companies should have policies and procedures in place to (1) guard against directors, officers, and other corporate insiders taking advantage of the period between the company's discovery of a cybersecurity incident and public disclosure of the incident to trade on material nonpublic information about the incident, and (2) help ensure that the company makes timely disclosure of any related material nonpublic information," the SEC said.

The SEC didn't specify what it meant by "timely fashion," but it did reiterate the need to disclose breaches and security risks sooner and with more information. "Given the frequency, magnitude and cost of cybersecurity incidents, the Commission believes that it is critical that public companies take all required actions to inform investors about material cybersecurity risks and incidents in a timely fashion, including those companies that are subject to material cybersecurity risks but may not yet have been the target of a cyber-attack," the SEC said in its statement. 

Chris Pierson, CEO of Binary Sun Cyber Risk Advisors, says the SEC's new guidance forces companies to more proactively address risks of security incidents.

"This Guidance serves as a loud wake-up call for all Boards of Directors to determine who among them is a cybersecurity and risk expert, what role the Board is playing in governing cybersecurity risks, and how exactly the Board is managing these risks and responding to incidents," Pierson says. "Just like with Sarbanes Oxley, the SEC is telling the Board to figure out how they will govern and oversee all risks, but most especially cybersecurity risks and incidents."

The SEC doesn't go into specifics on disclosure guidance. Chris Roberts, chief security architect at Acalvio, says the SEC actually goes "round and round in circles" on that.

"Basically it's saying we'd like to know if you have a risk, but we are not really asking because we don't want you to disclose because that'll be bad and give the criminals ways to break into you," he says. "But, really we want to know if it's going to break Wall Street. However, we don't want to know because it'll break you. But we kind of want to know if you really think we need to know," he says the SEC's statement said.

Read the full SEC guidance here.

 

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Kelly Jackson Higgins is the Executive Editor of Dark Reading. She is an award-winning veteran technology and business journalist with more than two decades of experience in reporting and editing for various publications, including Network Computing, Secure Enterprise ... View Full Bio
 

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REISEN1955
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REISEN1955,
User Rank: Ninja
2/23/2018 | 8:40:21 AM
And this needs to be a RULE?????
COMMON SENSE really.  Businesses should be open and forthcoming about events like this but because it is BAD news (depress shareholder value) and because the C-Suite has zero understanding of what a threat can do (save depress shareholder value) ... IT is encouraged to hide, sweep issues under the rug, deny and let the C-Suite blame it (as Equifax did) one ONE, JUST ONE, IT worker who has ( of course ) been discharged (thereby saving shareholder value).  THEN in a few months the truth comes out and all hell breaks loose, depressing (dramatically) shareholder value even more than had they been honest about it in the first place.
Dr.T
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Dr.T,
User Rank: Ninja
2/25/2018 | 11:26:21 AM
Re: And this needs to be a RULE?????
COMMON SENSE really. I would agree with this, it needs to be based on common sense.
Dr.T
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Dr.T,
User Rank: Ninja
2/25/2018 | 11:27:53 AM
Re: And this needs to be a RULE?????
Businesses should be open and forthcoming about events I would agree with this too. There are other laws and regulations that forces them to to the ethical thing.
Dr.T
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Dr.T,
User Rank: Ninja
2/25/2018 | 11:29:43 AM
Re: And this needs to be a RULE?????
the C-Suite has zero understanding of what a threat can do I would say they actually know what is happening, they may just hold it to themsleve to use it as a leverage.
Dr.T
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Dr.T,
User Rank: Ninja
2/25/2018 | 11:31:55 AM
Re: And this needs to be a RULE?????
Equifax C-suite may be overlooking things, lower layer roles still have major roles to play, it the could not secure the network they should resign to avoid responsibility.
Joe Stanganelli
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Joe Stanganelli,
User Rank: Ninja
2/25/2018 | 9:40:26 PM
Re: And this needs to be a RULE?????
This is part of the problem of being a company on the public stock exchange. Short-term-gain investors have motives and goals that are completely contrary to long-term organizational goals. And yet trying to please short-term investors is usually a failing strategy.
Dr.T
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Dr.T,
User Rank: Ninja
2/25/2018 | 11:33:26 AM
Trading stocks
execs can't trade stocks if they have unannounced information on a security breach This is good I think. It should involve not only security breaches but all other things that can give advantages to execs.
Joe Stanganelli
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Joe Stanganelli,
User Rank: Ninja
2/25/2018 | 9:42:05 PM
Re: Trading stocks
@Dr.T: To be fair, and to say nothing of self-dealing (which is a different, albeit related, matter entirely), there are some economists that have touted the theory that insider trading is good for markets and should be legalized as such -- because the immediate effect it has on market value allows information to reach investors more quickly. There is some good debate on this issue.

247locksmith
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247locksmith,
User Rank: Apprentice
2/25/2018 | 1:16:45 PM
What the heck??
Why does this need to be a rule?? It should be obvious that they need to disclose risks such as this! Cybersecurity is something that has to be taken seriously. I think that's just as serious as hiring an emergency locksmith service when you need it.
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