Why do you need a cyber attorney? Shawn Tuma explains in Ethical Boardroom

spring2018In my latest article in Ethical Boardroom article, I explain some of the not-so-obvious reasons why you need an experienced cyber attorney on your team: Why you need a cyber attorney (Spring 2018)

Here are other Ethical Boardroom (@EthicalBoard) articles that I have written or contributed to that are also available for free:

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Shawn Tuma (@shawnetuma) is a business lawyer with an internationally recognized reputation in cybersecurity, computer fraud, and data privacy law. He is a Cybersecurity & Data Privacy Partner at Scheef & Stone, LLP, a full-service commercial law firm in Texas that represents businesses of all sizes throughout the United States and, through its Mackrell International network, around the world.

Do data breaches have consequences? Will Equifax CIO serve jail time for insider trading?

“Corporate insiders who learn inside information, including information about material cyber intrusions, cannot betray shareholders for their own financial benefit.” Richard R. Best, SEC – Atlanta Division

For years many in the cybersecurity/data breach space have been saying that somebody is going to have to go to jail before corporate decision-makers begin to take cybersecurity as seriously as they should. Many thought the Department of Justice’s focus on individual accountability through the “Yates Memo” may be the vehicle but that has not yet happened.

With the Equifax breach and revelations that three executives had sold stock in the company before the breach was announced publicly, we saw an outcry against what was believed to be insider trading and calls for the executives to face jail time:

Thirty-six U.S. senators on Tuesday called on federal authorities to investigate the sale of nearly $2 million in shares of credit bureau Equifax Inc by company executives after a massive data breach, and one compared their actions to insider trading.

The lawmakers signed a letter asking the U.S. Department of Justice, the Securities and Exchange Commission and the Federal Trade Commission to look into about $1.8 million in stock sales by three executives between July 29 – the day Equifax said it learned that its systems were hacked in mid-May – and when they made it public last week.

“If that happened, somebody needs to go to jail,” Senator Heidi Heitkamp, a Democrat on the Senate Banking Committee, said at a credit union industry conference in Washington. “It’s a problem when people can act with impunity with no consequences. How is that not insider trading?”

gate-191675_1920As it turned out, however, the sale of stock by those Equifax executives was found to have been properly approved and they did not know of the data breach at the time of the sale, so it was not the problem that many had suspected.

Criminal Charges Filed Against Former CIO of Equifax Unit

For one former Equifax executive, however, his actions were not quite so innocent and may now give rise to the closest chance yet of someone actually getting jail time as a consequence of a data breach:

If these allegations are true, this certainly sounds like insider trading. As stated by Richard R. Best, Regional Director of the Atlanta Regional Office of the SEC, “Corporate insiders who learn inside information, including information about material cyber intrusions, cannot betray shareholders for their own financial benefit.”

Best’s sentiments were echoed by David J. LeValley, Special Agent in Charge of FBI Atlanta: “By prosecuting cases like this, the FBI and the U.S. Securities and Exchange Commission are sending a strong message to company insiders that they must follow the same rules that govern regular investors. Otherwise, they face the severe consequences for failing to do so.”

Severe consequences can mean many things. What everyone is really wanting to know is whether Ying actually serve any jail time. If he does, this case will be a game-changer that moves the needle of data breach consequences significantly upward. We will not know the answer to that question until he is convicted (or enters a plea agreement) and sentenced. Some articles state that Ying is facing up to 25 years in jail on the charges. Neither the SEC nor DOJ press releases state how long of a sentence is being sought.

As far as real-life insider trading cases where people have actually been sentenced to jail go, a Wall Street Journal post from 2014 discussing the longest insider trading sentences has the top 5 longest sentences ranging from 12 years down to 7 years. Comparing the amount of money involved in those cases to the $117,000 in losses that Ying avoided makes this cases relatively small. I doubt we will see anything approaching those sentences.

If the question, however, is not how much jail time will Ying get but whether he will get any jail time, I think both the SEC and DOJ have been looking for the right poster child to make an example out of and Ying may have drawn the short straw. Let’s see …

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Shawn Tuma (@shawnetuma) is an attorney with an internationally recognized reputation in cybersecurity, computer fraud, and data privacy law. He is a Cybersecurity & Data Privacy Attorney at Scheef & Stone, LLP, a full-service commercial law firm in Texas that represents businesses of all sizes throughout the United States and, through its Mackrell International network, around the world.

The Most Positive Cybersecurity Trend I Have Seen in Nearly 20 Years!

business-1989131_1920In the last quarter of 2017, I have observed a cybersecurity trend that has given me more hope than any that I have seen previously. Let me explain.

As an attorney, I have been practicing what can generally be described as cyber law or cybersecurity law since 1999, which means that my practice has evolved a lot over the years. It also means that I have seen a lot over the years.

My practice has been divided into three distinct areas over the last several years:

  1. Proactively, by helping clients assess and understand their overall cyber risk and then developing, implementing, and maturing a strategic cyber risk management program that prioritizes their efforts to help minimize their cyber risk.
  2. Reactively, by leading companies through the cyber incident response and data breach response process (e.g.,  as a “breach guide” or “breach quarterback”) and regulatory investigations and enforcement actions.
  3. Reactively, by representing clients in litigation involving cyber-related claims like data loss, data theft, computer hacking, and business to business disputes concerning responsibility for cyber incidents.

For nearly twenty years, the number of clients that have hired me to help in a reactive role, such as with incident response and litigation of cyber claims, has towered above those who have sought my help for proactively assessing their cyber risk and developing and implementing a cyber risk management program. It has not even been close.

This has not been due to a lack of effort on my part. I have always done my best to encourage clients to be responsible when it comes to cybersecurity by being proactive and focusing first on risk management and prevention but this has generally fallen on deaf ears. They did not want to be cyber responsible — or, even if they did want to be, they were not willing to invest resources into being cyber responsible.

But in the last quarter of 2017, this has changed.

The trend that I have observed developing over the last Quarter of 2017 is outstanding! For the last few months I have had substantially more clients hire our firm for helping them with a proactive cyber risk management program than we have ever seen in the past, so much so that the amount of work we are now doing on these programs is equal to or greater than the amount of work we are doing on incident response and litigation.

What makes this trend so great? The answer is simple: it shows that companies are finally starting to get it! They are finally seeing that it is better for them to invest resources into proactively preventing cyber incidents and data breaches from happening than it is to sit back and wait with the only strategy being to hope that it will not happen to them — because it will happen to them if they do nothing to stop it.

I hope that the trend that I am seeing is consistent across the industry. If it is, we just may be turning the corner in the war on cybercrime that is destroying our companies and decimating our individual privacy.

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Shawn Tuma (@shawnetuma) is an attorney with an internationally recognized reputation in cybersecurity, computer fraud, and data privacy law. He is a Cybersecurity & Data Privacy Attorney at Scheef & Stone, LLP, a full-service commercial law firm in Texas that represents businesses of all sizes throughout the United States and, through its Mackrell International network, around the world.

Complimentary Webinar: Countdown to #GDPR – Compliance for Non-EU Companies

Countdown to GDPR Compliance is a complimentary webinar that I will be moderating on Thursday, December 7, 2017, at 12:00 PM Central.  This is the second webinar in a three-part series sponsored by Mackrell International and will focus on Compliance for Non-EU Companies. You don’t want to miss it!

Moderator: Shawn Tuma
Presenter: Marta Stephanian, Ten Holter/Noordam
Presenter: Henrik Nilsson, Wesslau Söderqvist Advokatbyrå

 

COUNTDOWN TO GDPR COMPLIANCE: Compliance for Non-EU Companies
Sponsored by Mackrell International
Thursday, December 7, 2017 @ 12:00 PM CT
LINK for more information
Register via email: GDPR@hogefenton.com

GDPR Invite 2 11_21

I hope you are able to attend the webinars and find the information helpful in your business. As always, please let me know if you have any questions or if I can help you.

Shawn E. Tuma | Scheef & Stone, L.L.P.
Cybersecurity & Data Privacy Attorney
2600 Network Blvd., Suite 400, Frisco, TX 75034
214.472.2135 (direct) | 214.726.2808 (mobile)
Email: shawn.tuma@solidcounsel.com
Firm: www.solidcounsel.com
Blog: www.businesscyberrisk.com

Uber’s Settlement With FTC Emphasizes Companies’ Need for Cyber Risk Management Programs

The FTC and Uber have settled the enforcement action the FTC brought against the company. This action stems from Uber’s data breach of more than 100,000 individuals’ PII despite its promises that their data was “securely stored within our databases.” The FTC found this promise was misleading when compared with the actions the company was really taking. In settling the dispute, Uber entered into a Consent Decree that Continue reading “Uber’s Settlement With FTC Emphasizes Companies’ Need for Cyber Risk Management Programs”

Does Board Oversight of Cybersecurity Mean Directors Must Become Cybersecurity Experts?

Does the board of directors’ duty of oversight over their companies’ cybersecurity require the individual directors to become experts on cybersecurity? That is a fair question and one that I’ve seen many people have difficulty understanding.

The answer is “no,” as explained by Michael Santarcangelo (@catalyst) in his CSO article Why the board needs security leaders to fuel disciplined growth:

As the risk of breaches increases, boards – whose role when they oversee the CEO is to act as fiduciaries on behalf of shareholders– are increasingly at risk of falling short of their responsibilities. While board members are not expected to be experts on information security, they must make sure that the company has the right people and processes in place to erect defenses against information security violations, to establish procedures for monitoring the level of information security, and to make sure that the right steps are taken should a security breach occur.

Santarcangelo interviews Peter S. Cohan in this article and shares additional insight that all directors, CEOs, and CISOs need to understand about each of their respective roles in this process. Take the time to read this article.

 

Critical Steps Companies Must Take to Comply with New York’s Cybersecurity Rules – Ethical Boardroom

Winter2017New York’s Cybersecurity Regulations went into effect on March 1, 2017 and their impact could reach farther than you think — including to small and mid-sized companies that do not do business in New York and are not in the financial services industries. And, they require direct involvement by the Board of Directors. Is your company ready?

In my latest Ethical Boardroom article, I explain

  1. how these Cybersecurity Regulations can impact businesses of all sizes, in all industries, and all around the world,
  2. what specific steps regulated companies must take to be in compliance with the Cybersecurity Regulations, and
  3. what these Cybersecurity Regulations mean for nearly all companies.

Here is the full article from the Winter 2017 edition (page 140) which is available with free registration to the Ethical Boardroom website: Getting to Grips with New York’s Cybersecurity Compliance Rules

Here are other Ethical Boardroom (@EthicalBoard) articles that I have written that are also available for free:

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Shawn Tuma (@shawnetuma) is a business lawyer with an internationally recognized reputation in cybersecurity, computer fraud, and data privacy law. He is a Cybersecurity & Data Privacy Partner at Scheef & Stone, LLP, a full-service commercial law firm in Texas that represents businesses of all sizes throughout the United States and, through its Mackrell International network, around the world.

Improving Your Cybersecurity Plan, Explained by Paul Ferrillo in WSJ

The Wall Street Journal did an interview of my friend, collaborator, prolific author, and the the original Cyber Patriot, Paul Ferrillo to discuss how companies can make their cybersecurity plan better. Here is the full article: Making Your Cybersecurity Plan Better

Paul and I are both firm believers in focusing on the basics so that is all you really need to know to make you want to read the article. Beyond that, I’m not going to spoil it here by giving away all of the answers but here are some of the topics that Paul explains in more detail in the article:

  • What are the biggest mistakes companies make when it comes to thinking about and executing on a cybersecurity plan?
  • Why companies have trouble communicating about cybersecurity issues.
  • What companies can do to improve their communications.
  • Whether boards are getting better about cybersecurity issues.
  • Where companies are falling short in training employees about cybersecurity.
  • How companies should think about cybersecurity in the new Trump administration.

Go read the article Making Your Cybersecurity Plan Better and give Paul a shoutout on Twitter (@PaulFerrillo) or LinkedIn (Profile) or on this LinkedIn post and let him know what you think!

 

New York Cybersecurity Regulations Delayed, Being Revised

New York Skyline at Twilight Hour
The New York Skyline at Twilight Hour

Photo Credit: Photo Credit: Marco Verch
Licensed under Creative Commons Attribution 2.0 (no changes were made to the image) https://creativecommons.org/licenses/by/2.0/deed.en

The New York Department of Financial Services has pushed back the effective date of its Cybersecurity Regulations from January 1, 2017 to March 1, 2017. This is to give the NYDFS time to significantly revise the proposed Cybersecurity Regulations initially released for comment in September 2016, which created quite a bit of controversy. The revised regulations are to be published on December 28, 2016.

The NYDFS signaled this change two days after a hearing in Albany, New York in which New York bankers voiced their concerns to New York State lawmakers. While the NYDFS has not elaborated on what is being re-written, the following are some of the key concerns that were voiced to lawmakers in the hearing:

  1. It would cost too much.
  2. Banks shouldn’t be forced to hire CISOs.
  3. The rules are too tough.
  4. New York’s regulation is too different from the federal rules of FFIEC, Federal Reserve, the OCC, the FDIC and even NIST.
  5. The regulation is “one size fits all.”
  6. It calls for too much incident reporting.
  7. The extra regulation and reporting could create an impression that New York banks are less secure than others.

These points are explained more thoroughly in the American Banker source article New York Rewriting Cybersecurity Rules After Banker Pushback.

Here are two articles I have written for SecureWorld that discuss the proposed NYDFS Cybersecurity Regulations and I will also address the revisions in the near future:

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Shawn Tuma (@shawnetuma) is a business lawyer with an internationally recognized reputation in cybersecurity, computer fraud, and data privacy law. He is a Cybersecurity & Data Privacy Partner at Scheef & Stone, LLP, a full-service commercial law firm in Texas that represents businesses of all sizes throughout the United States and, through its Mackrell International network, around the world.

Will Home Depot be the one to "get it"?

Home Depot Data Breach Shareholder Derivative Suit Against Directors Fails

Will Home Depot be the one to "get it"?Officers and directors of companies that have had data breaches have become targets of litigation through shareholder derivative claims since the consumer class-action claims have had a difficult time making it past the causation of harm threshold. Those officers and directors may now sigh in relief, if only briefly, following a November 30, 2016, ruling by the District Court in the Home Depot Shareholder Derivative Litigation dismissing the shareholders’ claims against the officers and directors. (Court’s Order) Continue reading “Home Depot Data Breach Shareholder Derivative Suit Against Directors Fails”