Cybersecurity has become a must for businesses across the globe. As technology advances, so do threats. As a result of this, the U.S. Securities and Exchange Commission (SEC) has introduced new rules. They revolve around cybersecurity and businesses could be significantly impacted by these new requirements.

These rules are a response to the growing sophistication of cyber threats. Additionally, the requirements help companies safeguard their sensitive information.

The following are key aspects of the new SEC regulations and how each may impact your business. The rules impact U.S. registered companies. As well as foreign private issuers registered with the SEC.

Reporting of Cybersecurity 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 Cybersecurity 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
Is your business subject to these new SEC cybersecurity requirements? If it is, then it may be time for another cybersecurity assessment. Penetration tests and cybersecurity assessments identify gaps in your protocols and help companies reduce the risk of cyber incidents and compliance failures.

Here are some of the potential areas of impact on businesses from these new SEC rules.

Increased Compliance Burden
Businesses now face an increased compliance burden. This is as they work to align their cybersecurity policies with the new SEC requirements. This might cause a significant overhaul of existing practices, policies, and technologies. Ensuring compliance will likely mean a large amount of time and resources.

Focus on Incident Response
The new regulations stress 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. This would be a notification in the event of a data breach.

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. In other words, how vendors manage cybersecurity. This shift in focus necessitates a comprehensive review. That review should be of existing vendor relationships. If a vendor does not meet the requirements, finding new, more secure vendors will be necessary.

Impact on Investor Confidence
Cybersecurity breaches can diminish 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. This can potentially lead to increased investments and shareholder trust.

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. This could lead to the development of more effective cyber protection solutions.

The SEC Rules Bring Challenges, but Also Opportunities
The new SEC cybersecurity requirements mark a significant milestone in the ongoing battle against cyber threats. While these regulations pose challenges, they also present opportunities that include:

  • Strengthening their cybersecurity posture.
  • Enhancing customer trust.
  • Fostering investor confidence.

By proactively embracing these changes, companies can not only meet regulatory expectations but also strengthen their defenses against the constantly evolving landscape of cyber threats. It is imperative to adapt to these regulations to ensure both long-term success and the resilience of your business.

Need Help with Data Security Compliance?
If you need assistance with ensuring compliance with respect to the SEC requirements or any other rules regulating your business, please reach out to us. One of our experienced team members will help guide you through what you need to know.