In Guidance Update No. 2015-02, the Division of Investment Management (Division) of the Securities and Exchange Commission (SEC) issued some high-level suggestions concerning the importance of cybersecurity for registered investment companies and registered investment advisers. The guidance outlines a number of measures these entities should consider for addressing cybersecurity risks. Of course, while some of these and other measures may have specific application to certain sectors of the financial services industry, many of these measures can and should be applied in most organizations, regardless of industry.

Increasingly, companies are realizing the need to tighten their policies and practices concerning information risk, but not sure about where to start or what framework to follow. There are, for sure, industry specific rules and regulations, such as the HIPAA privacy and security regulations that apply to healthcare providers, healthcare clearinghouses, health plans and their respective business associates, as well as state law mandates, such as the data security regulations in Massachusetts. The endnotes in this Guidance discuss and provide helpful links to more specific SEC rules concerning the safeguarding of personal information, such as the Red Flag rules. But among these standards are a number of common threads, many of which are contained in the Division’s guidance referred to above. These include:

  • Conduct a risk assessment designed to help the company understand the “nature, sensitivity and location of information that the firm collects, processes and/or stores, and the technology systems it uses” as well as the effectiveness of its governance structure to ensure appropriate controls are in place. This should be done regularly, perhaps annually. It also should be done when there are material changes in the business that are reasonably likely to alter the risks to sensitive data.
  • Develop access management policies. Not everyone in an organization should have access to all of its data. The first step is finding out who has access to what. See first bullet above…you might be surprised by what you find; scale back from there.
  • Prepare a written information security program that addresses necessary and appropriate administrative, physical and technical safeguards that you have implemented.
  • Strengthen perimeter defenses – maintain up-to-date firewalls, malware, and virus protections. The federal Office for Civil Rights claimed a healthcare provider failed to do this, and it cost the company $150,000.
  • Get control of mobile storage devices and consider whether a more formal “Bring Your Own Device” program is needed.
  • Address whether and under what circumstances encryption is warranted. Some applications may slow down operations, but that level of protection may help the company avoid a significant exposure.
  • Develop and practice an incident response plan. Writing down a plan for responding to a data breach is a good start, but for the members of your team that would be called upon to carry out the plan, a few dry runs would be beneficial.
  • Don’t leave your staff in the dark about what you have done – train your employees and create security awareness throughout the organization.
  • Make sure the third party service providers that the company relies upon are taking similar steps to safeguard data on your behalf.

Will following just these points mean you are 100% compliant with all of the company’s regulatory and contractual obligations pertaining to privacy and data security. Probably not. But they certainly will get you a lot closer and minimize a substantial amount of risk.

Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP)…

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Joe also is a member of the firm’s Employee Benefits practice group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Joe counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Joe’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Joe speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Joe served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.