On March 15, 2023 the Securities and Exchange Commission (“SEC”) proposed three new sets of rules (the “Proposed Rules”) which, if adopted, would require a variety of companies to beef up their cybersecurity policies and data breach notification procedures. As characterized by SEC Chair Gary Gensler, the Proposed Rules aim to promote “cyber resiliency” in furtherance of the SEC’s “responsibility to help protect for financial stability.”
In particular, the SEC has proposed:
- Amendments to Regulation S-P which would, among other things, require broker-dealers, investment companies, and registered investment advisers to adopt written policies and procedures for response to data breaches, and to provide notice to individuals “reasonably likely” to be impacted within thirty days after becoming aware that an incident was “reasonably likely” to have occurred (“Proposed Reg S-P Amendments”).
- New requirements for a number of “Market Entities” (including broker-dealers, clearing agencies, and national securities exchanges) to, among other things: (i) implement cybersecurity risk policies and procedures; (ii) annually assess the design and effectiveness of these policies and procedures; and (iii) notify the SEC and the public of any “significant cybersecurity incident” (“Proposed Cybersecurity Risk Management Rule”).
- Amendments to Regulation Systems Compliance and Integrity (“Reg SCI”) in order to expand the entities covered by Reg SCI (“SCI Entities”) and add additional data security and notification requirements to SCI Entities (“Proposed Reg SCI Amendments”).