Tag Archives: Anna Moody

SEC Releases New Guidance on Material Cybersecurity Incident Disclosure

by Eric T. Juergens, Erez Liebermann, Benjamin R. Pedersen, Paul M. Rodel, Anna Moody, Kelly Donoghue, and John Jacob

Photos of authors.

Top left to right: Eric T. Juergens, Erez Liebermann, Benjamin R. Pedersen, and Paul M. Rodel. Bottom left to right: Anna Moody, Kelly Donoghue, and John Jacob. (Photos courtesy of Debevoise & Plimpton LLP)

On June 24, 2024, the staff of the Division of Corporation Finance of the Securities and Exchange Commission (the “SEC”) released five new Compliance & Disclosure Interpretations (“C&DIs”) relating to the disclosure of material cybersecurity incidents under Item 1.05 of Form 8-K. A summary of the updates is below, followed by the full text of the new C&DIs.  While the fact patterns underlying the new C&DIs focus on ransomware, issuers should consider the guidance generally in analyzing disclosure obligations for cybersecurity events.

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Incident Response Plans Are Now Accounting Controls? SEC Brings First-Ever Settled Cybersecurity Internal Controls Charges

by Andrew J. Ceresney, Charu A. Chandrasekhar, Luke Dembosky, Erez Liebermann, Benjamin R. Pedersen, Julie M. Riewe, Matt Kelly, and Anna Moody

Photos of the authors

Top left to right: Andrew J. Ceresney, Charu A. Chandrasekhar, Luke Dembosky and Erez Liebermann. Bottom left to right: Benjamin R. Pedersen, Julie M. Riewe, Matt Kelly and Anna Moody. (Photos courtesy of Debevoise & Plimpton LLP)

In an unprecedented settlement, on June 18, 2024, the U.S. Securities & Exchange Commission (the “SEC”) announced that communications and marketing provider R.R. Donnelley & Sons Co. (“RRD”) agreed to pay approximately $2.1 million to resolve charges arising out of its response to a 2021 ransomware attack. According to the SEC, RRD’s response to the attack revealed deficiencies in its cybersecurity policies and procedures and related disclosure controls. Specifically, in addition to asserting that RRD had failed to gather and review information about the incident for potential disclosure on a timely basis, the SEC alleged that RRD had failed to implement a “system of cybersecurity-related internal accounting controls” to provide reasonable assurances that access to the company’s assets—namely, its information technology systems and networks—was permitted only with management’s authorization. In particular, the SEC alleged that RRD failed to properly instruct the firm responsible for managing its cybersecurity alerts on how to prioritize such alerts, and then failed to act upon the incoming alerts from this firm.

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Supreme Court Holds That “Pure Omissions” Are Not Actionable Under Rule 10b-5(b)

by Elliot Greenfield, Matthew E. Kaplan, Maeve O’Connor, Benjamin R. Pedersen, Jonathan R. Tuttle, Anna Moody, Brandon Fetzer, and Mark D. Flinn

Top left to right: Elliot Greenfield, Matthew E. Kaplan, Maeve O’Connor, and Benjamin R. Pedersen.
Bottom left to right: Jonathan R. Tuttle, Anna Moody, Brandon Fetzer, and Mark D. Flinn. (Photos courtesy of Debevoise & Plimpton LLP).

On April 12, 2024, in a highly anticipated decision, the Supreme Court held in Macquarie Infrastructure Corp. v. Moab Partners, L.P.[1] that pure omissions are not actionable in private litigation under Rule 10b-5(b). Resolving a circuit split, the Court held that Rule 10b-5(b) does not support a “pure omissions” theory based on an alleged failure to disclose material information required by Item 303 of SEC Regulation S-K (Management’s discussion and analysis of financial condition and results of operations, or MD&A). Instead, a “failure to disclose information required by [MD&A] can support a Rule 10b-5(b) claim only if the omission renders affirmative statements made misleading.”[2] While the decision arose in the context of Item 303, which requires disclosure of “known trends and uncertainties” that have had or are “reasonably likely” to have a material impact on net sales, revenues or income from continuing operations,[3] the decision stands for the broader principle that Rule 10b-5(b) does not support pure omissions theories based on alleged violation of any disclosure requirement. Such claims remain viable, however, under Section 11 of the Securities Act of 1933. This ruling provides welcome clarity to issuers and eliminates the risk of pure-omission claims under Rule 10b-5(b) based on the judgment-based requirements of MD&A.

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100 Days of Cybersecurity Incident Reporting on Form 8-K: Lessons Learned

by Charu A. Chandrasekhar, Erez Liebermann, Benjamin R. Pedersen, Paul M. Rodel, Matt Kelly, Anna Moody, John Jacob, and Kelly Donoghue

Photos of authors

Top (left to right): Charu A. Chandrasekhar, Erez Liebermann, Benjamin R. Pedersen, and Paul M. Rodel
Bottom (left to right): Matt Kelly, Anna Moody, John Jacob, and Kelly Donoghue (photos of courtesy of Debevoise & Plimpton LLP)

On December 18, 2023, the Securities and Exchange Commission’s (the “SEC”) rule requiring disclosure of material cybersecurity incidents became effective. To date, 11 companies have reported a cybersecurity incident under the new Item 1.05 of Form 8-K (“Item 1.05”).[1]

After the first 100 days of mandatory cybersecurity incident reporting, we examine the early results of the SEC’s new disclosure requirement.

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Resisting Hindsight Bias: A Proposed Framework for CISO Liability

by Andrew J. Ceresney, Charu A. Chandrasekhar, Luke Dembosky, Erez Liebermann, Julie M. Riewe, Anna Moody, Andreas A. Glimenakis, and Melissa Muse

photos of the authors

Top left to right: Andrew J. Ceresney, Charu A. Chandrasekhar, Luke Dembosky, and Erez Liebermann.                    Bottom left to right: Julie M. Riewe, Anna Moody, Andreas A. Glimenakis, and Melissa Muse. (Photos courtesy of Debevoise & Plimpton LLP)

On October 30, 2023, the U.S. Securities and Exchange Commission (“SEC” or “Commission”) charged SolarWinds Corporation’s (“SolarWinds” or the “Company”) chief information security officer (“CISO”) with violations of the anti-fraud provisions of the federal securities laws in connection with alleged disclosure and internal controls violations related both to the Russian cyberattack on the Company discovered in December 2020 and to alleged undisclosed weaknesses in the Company’s cybersecurity program dating back to 2018.[1] This is the first time the SEC has charged a CISO in connection with alleged violations of the federal securities laws occurring within the scope of his or her cybersecurity functions.[2] In doing so, the SEC has raised industry concerns that it intends to—with the benefit of 20/20 hindsight, but without the benefit of core cybersecurity expertise—dissect a CISO’s good-faith judgments in the aftermath of a cybersecurity incident and wield incidents to second guess the design and effectiveness of a company’s entire cybersecurity program (including as it intersects with internal accounting controls designed to identify and prevent errors or inaccuracies in financial reporting) and related disclosures and attempt to hold the CISO liable for any perceived failures.

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