The SEC cyber ruling opens the door to public companies and their Directors and Officers to potential regulatory probes and shareholder actions.

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The SEC cyber ruling opens the door to public companies and their Directors and Officers to potential regulatory probes and shareholder actions. As Directors, Officers and executives responsible for cybersecurity risk management are required disclose material cyber risk and material cyber incidents to the regulator and markets. Registrants that include Foreign Private Issuers.

The ruling creates positive and negative outcomes for insurers and covered registrants. In ones view mainly positive for the insurance industry and negative for registrants, if registrants cannot adequately demonstrate compliance to the ruling.

‘The rule also set a road map for investors to bring derivative claims alleging a company’s senior executives breached their fiduciary duty by failing to manage cyber risks. And it put insurers on alert that they could find themselves exposed to underlying claims, insurance attorneys say.’

With insurance companies paying close attention to D&O insurance policies, with some excluding cyber related claims. ‘As a result, public companies may soon find themselves in the “worst of both worlds,” where neither cyber nor D&O policies pay for legal bills over SEC investigations and investor lawsuits, said Steven Weisman, a partner at McCarter & English, LLP. D&O policies cover claims and regulator probes against a company and its directors.’

The lawyers are lining up “The plaintiff bar is drooling. They’re like, ‘when does this go into effect?’”

As significant for registrants is they are required to demonstrate their cybersecurity risk management compliance, a task many will find hard to do. That if they get wrong may expose them to greater regulatory scrutiny. As we wrote in our Bloomberg Law article a few weeks back (https://lnkd.in/eFGjKUnn) registrant compliance starts now.

Ted Dziekanowski Rachel V. Rose, JD, MBA #BobBob Dix

#cybersecurity #cyberriskmanagement #cyberregulation #securitiesandexchangecommission

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