Cybersecurity has become paramount for businesses across the globe. As technology advances, so do the threats. Recognizing this, the U.S. Securities and Exchange Commission (SEC) has introduced new rules. They revolve around cybersecurity. These new requirements are set to significantly impact businesses.
Understanding the new SEC cybersecurity requirements
The SEC’s new cybersecurity rules emphasize the importance of proactive cybersecurity measures. These are for businesses operating in the digital landscape.
One of the central requirements is the timely reporting of cybersecurity incidents. The other is the disclosure of comprehensive cybersecurity programs.
The rules impact U.S. registered companies, as well as foreign private issuers registered with the SEC.
Reporting of cyber-security incidents
The first rule is the disclosure of cybersecurity incidents deemed to be “material.” Companies disclose these on a new item 1.05 of Form 8-K.
Companies have a time limit for disclosure. This is within four days of the determination that an incident is material. The company should disclose the nature, scope, and timing of the impact.
It also must include the material impact of the breach. One exception to the rule is where disclosure poses a national safety or security risk.
Disclosure of cyber-security protocols
This rule requires extra information that companies must report. They report this on their annual Form 10-K filing.
The extra information companies must disclose includes:
- Their processes for assessing, identifying, and managing material risks from cybersecurity threats.
- Risks from cyber threats that have or are likely to materially affect the company.
- The board of directors’ oversight of cybersecurity risks.
- Management’s role and expertise in assessing and managing cybersecurity threats.
Potential impact on your business
Here are some of the potential areas of impact on businesses from these new SEC rules.
Increased Compliance Burden – Businesses will now face an increased compliance burden as they work to align their cybersecurity policies with the new SEC requirements.
Focus on Incident Response – The new regulations underscore the importance of incident response plans. Businesses will need to invest in robust protocols. These are protocols to detect, respond to, and recover from cybersecurity incidents promptly. This includes having clear procedures for notifying regulatory authorities, customers, and stakeholders.
Heightened Emphasis on Vendor Management – Companies often rely on third-party vendors for various services. The SEC’s new rules emphasize the need for businesses to assess vendor practices. Meaning, how vendors handle cybersecurity. This shift in focus necessitates a comprehensive review of your vendor’s security policies.
Impact on Investor Confidence – Cybersecurity breaches can erode investor confidence and damage a company’s reputation. With the SEC’s spotlight on cybersecurity, investors are likely to take note. This includes scrutinizing businesses’ security measures more closely. Companies with robust cybersecurity programs may instill greater confidence among investors.
Innovation in Cybersecurity Technologies – As businesses strive to meet the new SEC requirements, they will seek innovation. There is bound to be a surge in the demand for advanced cybersecurity solutions. This increased demand could foster a wave of innovation in the cybersecurity sector.