Enforcement - Federal Agency and State AG Action

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Late last week heralded two significant and highly anticipated updates to the California Consumer Privacy Act (CCPA).

On October 10, 2019, the Office of the California Attorney General issued a long-anticipated Notice of Proposed Rulemaking Action regarding the CCPA.  The full text of the proposed regulations can be found here.  The next day, Governor Gavin Newsom signed all seven amendments to the CCPA that came out of the California State Assembly.

This post will address the statutory amendments first since they modify the CCPA itself, then turn to the draft regulations (officially, the “California Consumer Privacy Act Regulations”).
Continue Reading CCPA Update: AG Issues Draft Regulations and Governor Signs Amendments

On April 16, the SEC’s Office of Compliance Inspections and Examinations (OCIE) issued a Risk Alert highlighting Regulation S-P compliance deficiencies and issues it found in recent examinations of broker-dealers and investment advisers.  Regulation S-P is the primary SEC rule detailing the safeguards these firms must take to protect customer privacy.  The Risk Alert provides an important reminder for firms to assess their supervisory and compliance programs related to Regulation S-P and make any necessary changes to strengthen those systems.  Indeed, in light of the substantial fines that can accompany a finding that Regulation S-P has been violated, firms must pay careful attention to the OCIE’s guidance regarding potential pitfalls.
Continue Reading SEC OCIE Highlights Potential Deficiencies in Firm Privacy Policies

On December 20, 2018, the Financial Industry Regulatory Authority (FINRA) released a report on cybersecurity practices for broker-dealers. Today’s post is the third in a series of summaries sharing essential, timely insight on how these practices may impact your business. Please click here for the first and second posts on cybersecurity practice impacts.

This post focuses on threats posed by insiders of the firm, which may be created by either deliberate, malicious conduct or by inadvertent mistakes. Both types of data breaches create significant risk to the firm and its customers. In the Report, FINRA notes that, while most higher revenue firms (95-99%) address insider threats as part of the program, only 66% of mid-level revenue firms address such risks. Its assessment comes from their review of firm responses to relevant inquiry areas in the 2017 and 2018 their Risk Control Assessment (RCA).
Continue Reading FINRA’s 2018 Report on Cybersecurity Practices – Insider Threats If Your Program Only Focuses on External Threats, You are Only Halfway There

On December 20, 2018, the Financial Industry Regulatory Authority (FINRA) released a report on cybersecurity practices for broker-dealers. Today’s post is the second in a series of summaries sharing essential, timely insight on how these practices impact your business. Please click here for the first post on cybersecurity practice impacts.

FINRA names “phishing” attacks as one of the most common cybersecurity threats raised by firms with the self-regulator.[1] The goal of a phishing email is to manipulate the recipient into taking action. FINRA focuses on two types of phishing attacks in the report. The first is “spear phishing,” where the sender researches and targets the recipient(s) with a customized approach designed to get confidential information from the individual(s). The second is “whaling,” wherein the hacker sends targeted emails impersonating senior executives at the firm in order to set action in motion, typically wiring funds to specifically identified accounts.   
Continue Reading FINRA’s 2018 Report on Cybersecurity Practices – Preventing “Spear Phishing” and “Whaling” Attacks

On December 20, 2018, the Financial Industry Regulatory Authority (FINRA) released a report on cybersecurity practices for broker-dealers. This post is the first of a series of summaries sharing essential, timely insight on how these practices impact your business. The Report follows close on the heels of FINRA’s annual Report on Examination Findings issued Dec. 14, 2018. Now we know why Cybersecurity, a top regulatory and examination priority for FINRA in 2018, was not included in their examination findings report. Not surprising, albeit somewhat unusual, the importance of the topic and FINRA’s insights warranted a separate communication.
Continue Reading FINRA Issues 2018 Report on Selected Cybersecurity Practices

In August, the Federal Trade Commission (FTC) approved changes to a video game industry program in an effort to ensure compliance with the Children’s Online Privacy Protection Act (COPPA). This comes after a 2017 study finding that YouTube, the video platform owned by Google, is the most popular online media platform among children, with as many as 80% of children ages 6-12 using it daily. Yet YouTube claims in its Terms of Service that the platform is not intended for anyone under the age of 13, and by agreeing to the terms, consumers affirm that they are indeed at least 13 years old. Users also agree to Google’s privacy policy, which details how Google collects data such as a viewer’s device, location, or phone number, and tailors advertisements and services based on that data.Continue Reading FTC Under Pressure from Congress to Investigate Violations of Child Privacy Laws

Beginning in 2020, California residents will have the right to opt out of the sale of their personal information under the California Consumer Privacy Act of 2018 (CaCPA or also called CCPA). It is time to revisit your third-party service provider agreements.  Companies now have two reasons to ensure that service provider agreements restrict the use or sale of personal information: to comply with CaCPA and to reduce risk of an FTC enforcement action.
Continue Reading Preparing for 2020: Check In On Your Vendors

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On October 16, 2018, the Securities and Exchange Commission (SEC) issued a report on the results of investigations made by the SEC’s Division of Enforcement into nine public companies that were victims of cyber-related frauds.  In each case, the SEC investigation focused on whether the target companies had complied with the applicable requirements of the Securities Exchange Act of 1934, as amended (Act). The Act requires public companies to devise and maintain a system of internal control over financial reporting designed to provide reasonable assurance that, among other things, transactions are executed in accordance with company management’s authorization, that transactions are properly recorded and that access to assets is permitted only with management’s authorization.

Ultimately, the SEC did not pursue enforcement actions against any of these companies, but released the report to advise public companies that cyber-fraud incidents must be taken into account when designing and maintaining internal control procedures.
Continue Reading SEC Report Reiterates Cybersecurity Implications for Internal Control Requirement

In the matter of LabMD Inc. v. Federal Trade Commission, case number 16-16270, the U.S. Court of Appeals for the Eleventh Circuit ruled against the FTC, finding that the order against LabMD for lax data security measures was not enforceable.

The FTC’s original order against LabMD was due to a 2008 security incident where a LabMD employee downloaded a program which exposed customer information over the internet. Although customer harm was never shown by FTC, in 2016 the agency issued a Final Order against LabMD for unreasonable data security practices. The case was eventually brought before the Eleventh Circuit by LabMD to determine if the alleged failure to implement reasonable data security measures in 2008 was an unfair practice under Section 5(a) of the FTC Act.Continue Reading FTC’s Loss in the Eleventh Circuit Will Not Impede Data Security Enforcement

This post originally appeared in our sister publication, Subject To Inquiry.

On May 21, the North American Securities Administrators Association (NASAA) announced a massive and coordinated series of enforcement actions by U.S. state and Canadian provincial regulators to combat fraudulent practices involving cryptocurrency-related investment products.

As cryptocurrencies have gained in popularity, companies have increasingly turned to a method known as an initial coin offering (ICO) to raise capital. ICOs, however, are ripe for potential fraud. As the Washington Post has explained, “consumers face higher risks of being misled at a time when the intense demand for bitcoin has prompted many retail investors to take extreme steps to gain exposure to the currency…”Continue Reading State Regulators Announce Cryptocurrency Crackdown