Publicly traded businesses now have yet another set of guidelines to follow regarding security risks and incidents. On October 13, 2011 the Securities and Exchange Commission (SEC) Division of Corporation Finance released a guidance document that assists registrants in assessing what disclosures should be made in the face of cyber security risks and incidents. The guidance provides an overview of disclosure obligations under current securities laws - some of which, according to the guidance, may require a disclosure of cyber security risks and incidents in financial statements.
As we have reported previously on our blog, federal agencies, including the FTC, NLRB and EEOC have been very active in taking action against privacy and information security violations. This trend continues with the Securities and Exchange Commission's (SEC's) recent announcement of a settlement with three former executives a brokerage firm (GunnAllen Financial, Inc.). The SEC alleged that the former executives violated the Commission's Privacy Rule and Safeguards Rule (Regulation S-P) and aided and abetted the firm in violating these rules. This enforcement action marks the first time the SEC assessed financial penalties against individuals charged solely with violating Regulation S-P.