SEC Updates Regulation S-P to Enhance Customer Data Protection
From the desk of Jim Eccleston at Eccleston Law
The SEC has introduced long-awaited updates to Regulation S-P, originally adopted in 2000, to improve the protection of customer records and information for broker-dealers, investment companies, and RIAs. According to WealthManagement, these updates focus on strengthening cybersecurity measures and improving the procedures for notifying customers in the event of data breaches.
Under the amended rules, financial institutions are now required to maintain written procedures for responding to cyber breach incidents. These procedures must include steps to detect the extent of a breach and to prevent further data leaks. Companies must inform affected customers as soon as possible, but no later than 30 days after discovering a breach. SEC Chair Gary Gensler emphasized the importance of these updates, noting the significant transformation in the nature, scale, and impact of data breaches over the past 24 years.
Michael Cocanower, founder and CEO of AdviserCyber, highlighted the SEC's increasing focus on cybersecurity, adding that the 30-day notification window allows sufficient time for investigation and customer notification. However, he acknowledged that complying may still present challenges to some firms.
While the updated regulations mandate written response policies and customer reporting, they do not require companies to have separate cyber insurance policies. Cocanower recommended that firms consider purchasing such policies, as they can provide critical resources for technical mitigation, investigation, legal counsel, customer notification, and credit monitoring services in the event of a breach.
The SEC’s amendments to Regulation S-P will take effect 60 days after their publication in the Federal Register. Larger entities will have 18 months to comply with the new rules, while smaller entities will have 24 months.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
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