Tag Archives: Avi Gesser

Ephemeral Messaging for Businesses: Balancing the Risks of Keeping and Deleting Data by Default

by Avi Gesser, Daniel F. Forester, and Mengyi Xu

One way for companies to decrease their cybersecurity risks, as well as their risks from new privacy regulations, is through data minimization—significantly reducing the amount of their data.  By deleting old data and collecting less new data, companies will have less sensitive information to protect and process in accordance with their regulatory obligations.  But getting rid of old data isn’t easy, in part because of the legal limitations on what can be deleted.  We have previously written about these challenges, as well as the benefits of data minimization, which include reducing:

  • the growth of a company’s data over time, and the associated storage costs;
  • lost productivity associated with searching large volumes of irrelevant data;
  • the cybersecurity and privacy risks of having large volumes of unneeded data, especially considering CCPA and GDPR-type rights of access and erasure;
  • internal audit and compliance risks;
  • contractual risks (e.g., obligations to clients and customers to delete data once it is no longer needed); and
  • the volume of documents that may be unhelpful to the company in potential, but not yet reasonably anticipated, litigation or regulatory inquiries.

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Regulators and Plaintiffs Aren’t Waiting for Privacy Legislation: Companies Face Potential Liability Now and Can Take Steps to Reduce Risks

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Momentum is building in Congress for federal privacy legislation and several states have their own privacy laws in the works.  But, as concerns grow that companies are collecting and sharing personal information about U.S. residents without their knowledge and not adequately protecting that data, regulators and plaintiffs aren’t waiting for new laws.  Instead, they are refitting existing laws to meet their data privacy and security objectives. Continue reading

The FTC Moves Toward a Rules-Based Approach to Cybersecurity Regulation for Financial Institutions

by Avi Gesser, Kelsey Clark, Jennifer E. Kerslake, and Eric McLaughlin

In our first Cyber Blog post, we predicted that the rules-based approach adopted by the NYDFS would become the model for cybersecurity regulation.  Two years later, we’re feeling pretty good about that prediction, as the FTC recently proposed incorporating a number of aspects of the NYDFS cybersecurity rules into its Standards for Safeguarding Customer Information rule (the “Safeguards Rule”).  The proposal would also expand the Safeguards Rule’s definition of “financial institution” to include “finders,” or companies that connect potential parties to a transaction.  As a reminder, the Safeguards Rule applies to financial institutions that are not regulated by the federal banking agencies, the SEC, or state insurance authorities, including non-bank mortgage lenders, payday lenders, finance companies, check cashers, money transmitters, collection firms, and tax preparers. Continue reading

Cyber Monitoring Employees Part 2 – Insider Threats Continue After Employees Leave

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We recently wrote about companies monitoring employees to reduce cybersecurity risks.  Those insider threat risks do not end when employees leave the company.  Sensitive company data in the hands of a disgruntled former employee is obviously a potential risk, but so is unauthorized access to confidential company information by a former employee acting in good faith.  Companies must therefore take steps to protect their data from walking out the door with exiting employees. Continue reading

The Weakness in Two-Factor Authentication—Your Lost Phone Policy

by Avi Gesser, John R. Kapp, and Michelle Adler

Two-Factor authentication is one of the most common measures that companies use to reduce cyber risk, but it is not very effective if companies don’t also have a good lost phone protocols.

Various regulations and industry rules require two-factor authentication (also referred to as multi-factor authentication or MFA) including the NYDFS cyber rules (PDF: 97.5 KB), the NIST identification and authentication requirements, the Payment Card Industry (PDF: 1.05 MB) (“PCI”) Data Security Standard 8.3, as well as the proposed amendments to GLBA.

MFA involves confirming that a purposed user of a certain login credential and password is actually the authorized user, by employing an additional verification method, such as a passcode sent to an employee’s phone by text message or through an authenticator app like Duo or Google Authenticator.  But, not all forms of verification are equal.  In 2016, the NIST considered not recommending SMS messages as a form of second-factor authentication due to their susceptibility to being redirected by attackers. Continue reading

NFA Members Should Prepare for Onerous New Breach Notification Requirements

by Avi Gesser, Jai Massari, Kelsey Clark, and Daniela Dekhtyar-McCarthy

On April 1, 2019, new cybersecurity requirements outlined in the NFA’s Interpretive Notice to NFA Compliance Rules 2-9, 2-36 and 2-49 will come into effect.  These new requirements apply to NFA Members, including registered futures commission merchants, commodity trading advisors, commodity pool operators, introducing brokers, retail foreign exchange dealers, and swap dealers.  They are designed to “establish general requirements relating to Members’ information systems security programs (ISSPs) but leave the exact form of an ISSP up to each Member.”  These ISSP obligations relate to, among others, approval and third-party cyber diligence (see our previous blog post).

Perhaps the most significant new obligation is the imposition of onerous breach notification requirements, which require NFA Members to notify the NFA “promptly” of any cybersecurity incident related to its commodity interest business that results in:

  • any loss of customer or counterparty funds;
  • any loss of an NFA Member’s own capital; or
  • the NFA Member providing notice to customers or counterparties under state or federal law.

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The Rise of Cyber Negligence Claims: Plaintiffs Find Receptive Judges by Going Back to Basics

By Avi Gesser and David Robles

New cyber regulations, such as the California Consumer Privacy Act, have companies concerned about expanding potential liability.  Companies fear that private rights of action are being created that will allow consumers to sue by alleging that the companies failed to protect their personal information.  But attention should also be paid to plaintiffs’ recent successes in applying existing legal frameworks—such as basic tort law—to cyber cases.  We have previously written about the use of state consumer protection acts to recover in data breach cases.  Recently, plaintiffs have also made some significant inroads in bringing negligence actions against companies that have experienced cyber events.

On January 28, 2019, the U.S. District Court for the Northern District of Georgia issued a decision in the Equifax Consolidated Consumer Class Action, allowing the consumers’ negligence claims against Equifax to move forward.  Judge Thrash found that the consumers had sufficiently alleged injuries resulting from the breach, pointing to the “unauthorized charges on their payment cards as a result of the Data Breach” as actual, concrete injuries that are legally cognizable under Georgia law.  The Court rejected Equifax’s arguments that the consumer’s injuries should be attributed to the hackers and could have been caused by data breaches at other companies.  The Court noted that allowing companies “to rely on other data breaches to defeat a causal connection would ‘create a perverse incentive for companies: so long as enough data breaches take place, individual companies will never be found liable.’”  Critically, the Court found that, given the foreseeable risk of a data breach, Equifax owed consumers an independent legal duty of care to take reasonable measures to safeguard their personal information in Equifax’s custody.  In doing so, the Court found that the economic loss doctrine was not a bar to the consumers’ recovery because Equifax owed an independent duty to safeguard personal information. Continue reading

Alternative Data Goes Mainstream, and Gets Increased Attention from Regulators

by Avi Gesser, Eric McLaughlin, Clara Y. Kim, and Sumeet Sanjeev Shroff

In the last few years, we have seen a dramatic increase in the purchase and sale of alternative data—a shorthand for big data sets, such as satellite images of parking lots, drug approvals, credit card purchases, cellphone data on retail foot traffic, and construction permits. According to alternativedata.org, the alternative data industry is projected to be worth $350 million in 2020. The recent announcement by Bloomberg LP that it is offering a product that will give clients access to large volumes of alternative data shows the widespread use of this information in making investment decisions, which is causing hedge fund managers and institutional investors to seek even more untapped alpha-generating data sets.  Not surprisingly, all this activity is attracting increased regulatory scrutiny. Continue reading

Microchipping Employees and Biometric Privacy Laws – It’s Time To Start Paying Attention

By Avi Gesser, David Popkin, and Michael Washington

Until recently, biometric privacy was a niche area of the law that had little application to most companies.  But with the rapid growth in commercial biometric data collection, including voice samples, fingerprints, retina scans, and facial geometry, as well as some recent developments in the applicable case law, it’s probably time for companies to start paying attention.  Indeed, one of our top privacy law predictions for 2019 was a judicial expansion of the notion of harm, which happened quicker than we anticipated in the context of gathering biometric data.

On January 25, 2019, the Illinois Supreme Court decided Rosenbach v. Six Flags Entertainment Corporation, 2019 IL 123186 (PDF: 61.7 KB), unanimously finding that plaintiffs could bring a private cause of action for violations of the notice and consent requirements of the state’s biometric privacy law without any showing of harm.  In Six Flags, a mother sued the owner of a theme park on behalf of her teenaged son after he was fingerprinted in connection with the purchase of a season pass to the park.  Neither the son nor the mother consented in writing to the taking of the fingerprint or signed any written release. Further, the park did not provide any documentation about their retention schedule or guidelines for retaining and then destroying the data.  The court found that individuals possess a right to privacy in and control over their biometric identifiers. Continue reading

2019 Predictions – Top 10 Cybersecurity/Privacy Trends to Prepare for Now

by Avi Gesser, Daniel Forester, Will Schildknecht, Clara Kim, Daniela Dekhtyar-McCarthy, Mikaela Dealissia, Dan Thomson, and Mengyi Xu

2018 was another busy year for lawyers in the privacy/cybersecurity world – GDPR, CCPA, Marriott, New York Department of Financial Service’s cybersecurity rule deadlines, increased SEC enforcement, more data breach lawsuits, more companies doing table top exercises and risk assessments, etc.  But 2019 is looking to be even busier.  Below are our predictions for the Top 10 things that will keep us busy in 2019, and what companies should be preparing for: Continue reading