The Eleventh Circuit Court of Appeals recently vacated a Federal Trade Commission cease-and-desist order that required a medical laboratory company to implement a “reasonably designed” cybersecurity program after customer data on the company’s systems were compromised. LabMD, Inc. v. Federal Trade Commission (PDF: 548 KB). The decision represents a judicial curb on FTC enforcement efforts seeking expansive cease-and-desist orders requiring companies to maintain “reasonable” or “appropriate” data security systems in the wake of cyber incidents. By limiting the FTC to orders that prohibit specific unfair conduct, or that require specific responsive remedial action, this ruling may alter the cyber enforcement landscape and affect the balance between the FTC and companies affected by cyber incidents. Continue reading
Yesterday, in keeping with a heightened governmental focus on cybersecurity, as exemplified by the Justice Department’s formation of a new Cyber-Digital Task Force (PDF: 62 KB) earlier this week, the Securities and Exchange Commission announced new guidance on cybersecurity disclosures by public companies (the “Guidance (PDF: 139 KB)”).
Much of the Guidance tracks 2011 interpretive guidance from the SEC’s Division of Corporation Finance and retains a focus on “material” cyber risks and incidents. However, the expanded details and heightened pressure to disclose indicated in the Guidance, along with its issuance by the Commission itself, signal that the SEC expects public companies to consider more detailed disclosure of cyber risks and incidents, and to maintain “comprehensive” policies and procedures in this area. The SEC is also encouraging, though not requiring, forward-leaning approaches, such as with respect to disclosures about the company’s cyber risk management programs and the engagement of the board of directors with management on cybersecurity issues. SEC Chairman Jay Clayton has also directed (PDF: 92 KB) SEC staff to monitor corporate cyber disclosures. Continue reading