White House Will Unveil Cyber Executive Actions At A Summit This Week

Squire Patton Boggs (US) LLP law firm

Legislative Activity

This Week’s Hearings:

  • Wednesday, February 11: The Senate Commerce, Science and Transportation Committee will hold a hearing titled “The Connected World: Examining the Internet of Things.”

  • Thursday, February 12: The House Homeland Security Subcommittee on Cybersecurity, Infrastructure Protection and Security Technologies will host a hearing titled “Emerging Threats and Technologies to Protect the Homeland.”

  • Thursday, February 12: The House Education and the Workforce Subcommittee on Early Childhood, Elementary and Secondary Education will hold a hearing titled “How Emerging Technology Affects Student Privacy.”

  • Thursday, February 12: The House Science, Space and Technology Subcommittee on Research and Technology and Subcommittee on Oversight will hold a joint hearing titled “Can Americans Trust the Privacy and Security of their Information on HealthCare.gov?”

Regulatory Activity

White House Will Unveil Cyber Executive Actions at a Summit this Week

On Friday, February 13, the White House will hold its Summit on Cybersecurity and Consumer Protection at Stanford University. President Obama will be speaking at the Summit and plans to issue a new Executive Order focusing on ways to increase cybersecurity information sharing between the private sector and the U.S. Department of Homeland Security (DHS).

The executive action will likely expand the current work that DHS’s National Cybersecurity and Communications Integration Center (NCCIC) does to include a new concept of Information Sharing and Analysis Organizations (ISAO), which was briefly previewed by the President last month. As currently discussed, ISAOs would be designed to share information across multiple industry sectors to supplement the work of the current network of Information Sharing and Analysis Centers (ISACs).  According to press reports from government officials, the executive action is expected to create a network of ISAOs that would be managed by DHS in the beginning and eventually would become a privately-run entity. Several government officials and industry representatives have said that the President’s action will represent a step forward to improving the current information sharing platforms but they also recognize that information sharing legislation is still needed.

In addition to the Summit on Friday, the National Institute of Standards and Technology (NIST) will hold a half-day workshop on Thursday focused on the technical aspects of consumer security. The Office of Science and Technology Policy will also host a meeting leading up to the Summit on Thursday focused on cybersecurity workforce development.

White House Blog Highlights Future Action on Cyber Risk Management

Last week, White House Cybersecurity Coordinator Michael Daniel wrote a blog post on how companies can strengthen their cyber risk management and the role of the federal government in incentivizing stronger cybersecurity practices in the private sector. He notes in the post that the White House believes “the market offers the most effective incentives for the private sector to adopt strong cybersecurity practices,” but also stated that the Obama Administration will continue to work in a variety of areas to support these efforts by streamlining regulations, investing in cybersecurity research and development, and updating federal procurement policies and practice. Daniel wrote that the White House is working with federal agencies and critical infrastructure to identify regulations that are excessively burdensome, conflicting, or ineffective and will release a report on the findings no later than February 2016. Additionally, the White House plans to release a report this spring on the key priorities for cybersecurity research and development over the next three to five years.

The blog post also noted that the White House will not pursue public recognition as a means of incentivizing the private sector to adopt cybersecurity best practices or the NIST Cybersecurity Framework given that this could take away from the voluntary nature of the Framework. While Daniel did not mention liability protection as an incentive for greater information sharing in the blog post, it is still a possible incentive that the White House would support given that it was also included in the information sharing legislative proposal that the President released last month.

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SEC Commissioner Highlights Need for Cyber-Risk Management in Speech at New York Stock Exchange

Proskauer Law firm

Cyber risks are an increasingly common risk facing businesses of all kinds.  In a recent speech given at the New York Stock Exchange, SEC Commissioner Luis A. Aguilar emphasized that cybersecurity has grown to be a “top concern” of businesses and regulators alike and admonished companies, and more specifically their directors, to “take seriously their obligation to make sure that companies are appropriately addressing those risks.”

Commissioner Aguilar, in the speech delivered as part of the Cyber Risks and the Boardroom Conference hosted by the New York Stock Exchange’s Governance Services department on June 10, 2014, emphasized the responsibility of corporate directors to consider and address the risk of cyber-attacks.  The commissioner focused heavily on the obligation of companies to implement cybersecurity measures to prevent attacks.  He lauded companies for establishing board committees dedicated to risk management, noting that since 2008, the number of corporations with board-level risk committees responsible for security and privacy risks had increased from 8% to 48%.  Commissioner Aguilar nevertheless lamented what he referred to as the “gap” between the magnitude of cyber-risk exposure faced by companies today and the steps companies are currently taking to address those risks.  The commissioner referred companies to a federal framework for improving cybersecurity published earlier this year by the National Institute of Standards and Technology, which he noted may become a “baseline of best practices” to be used for legal, regulatory, or insurance purposes in assessing a company’s approach to cybersecurity.

Cyber-attack prevention is only half the battle, however.  Commissioner Aguilar cautioned that, despite their efforts to prevent a cyber-attack, companies must prepare “for the inevitable cyber-attack and the resulting fallout.”  An important part of any company’s cyber-risk management strategy is ensuring the company has adequate insurance coverage to respond to the costs of such an attack, including litigation and business disruption costs.

The insurance industry has responded to the increasing threat of cyber-attacks, such as data breaches, by issuing specific cyber insurance policies, while attempting to exclude coverage of these risks from their standard CGL policies.  Commissioner Aguilar observed that the U.S. Department of Commerce has suggested that companies include cyber insurance as part of their cyber-risk management plan, but that many companies still choose to forego this coverage.  While businesses without cyber insurance may have coverage under existing policies, insurers have relentlessly fought to cabin their responsibility for claims arising out of cyber-attacks.  Additionally, Commissioner Aguilar’s speech emphasizes that cyber-risk management is a board-level obligation, which may subject directors and officers of companies to the threat of litigation after a cyber-attack, underscoring the importance of adequate D&O coverage.

The Commissioner’s speech offers yet another reminder that companies should seek professional advice in determining whether they are adequately covered for losses and D&O liability arising out of a cyber-attack, both in prospectively evaluating insurance needs and in reacting to a cyber-attack when the risk materializes.

Read Commissioner Aguilar’s full speech here.

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