New SEC Cybersecurity Compliance Requirements and the Potential Impact on Your Business

You’ve likely noticed an uptick in the number of cyberattacks and data breaches on the news or in your business. In response to that, the U.S. Securities and Exchange Commission (SEC) has created new cybersecurity rules aimed at strengthening business’s security posture. The SEC created these new regulations to help companies better protect their sensitive information and respond effectively to incidents as they arise. It is crucial to understand the implications of the new requirements so your business can maintain cybersecurity compliance and safeguard your organization’s operations. Here, we explore the key aspects of the new SEC rules and their potential impact on your business.

Understanding the New SEC Cybersecurity Requirements 

The new cybersecurity rules set by the SEC emphasize how important it is for any business that operates in the digital landscape to set proactive measures. The main requirements are reporting cyber incidents in a timely manner and disclosing comprehensive cybersecurity programs. The new rules apply to any company registered in the U.S. and any foreign private issuers that are registered with the SEC. 

Timely Reporting of Cyber Incidents 

In order to maintain cybersecurity compliance, it is now required to report any incident within four days. A cornerstone of this SEC requirement is disclosing cyber incidents if they were deemed “material.” Once your organization has determined if the cyber breach was “material” you will need to disclose through the new item, 1.05 of Form 8-k. This form requires companies to detail the scope, nature, timing and impact of the incident. There is one exception to the rule that likely won’t come up for your organization: If the disclosure poses a national security risk then the U.S. Attorney General will need to notify the SEC in writing. 

Disclosure of Comprehensive Cybersecurity Programs 

There are additional reporting requirements on your annual Form 10-K filing. In order to keep in cybersecurity compliance you must provide information about your processes for identifying, assessing and managing material risks from cybersecurity threats. In this new reporting, you must include any risks that have or are likely to materially affect the company, and the board of directors’ oversights of cybersecurity risks. You’ll also need to include the management’s expertise and role in managing any cyber threats. 

The Potential Impact on Your Business 

Any new cybersecurity compliance rule is bound to have an impact on your business. The main impacts of the new SEC regulations range from increased focus on incident response to the potential for new cybersecurity technologies.  

Focus on Incident Response

These new regulations shed light on the need for a robust incident response plan. If you do not have an incident response plan in place or it has been a while since it has been refreshed, then it is time to put a new plan in place. Your business will need to invest in protocols for detecting, responding to and recovering from cybersecurity incidents promptly. It will need to include clear procedures for notifying any regulatory authorities, your customers and stakeholders if a breach happens. When you have a comprehensive plan, your business will mitigate damage, reduce recovery time and keep your customers’ trust. 

Increased Compliance Burden

New rules and regulations mean more work for your team members. With these new rules, your business will need to align its cybersecurity policies to ensure cybersecurity compliance. The impact will be felt whether your business is a large corporation or a small business. There will need to be significant overhauls of existing practices, policies and technologies. Ensuring regulatory and cybersecurity compliance is unfortunately going to require a substantial investment of resources and time. You may need to hire any additional staff, seek consulting services or invest in new technology. 

Impact on Investor Confidence 

Cybersecurity breaches can not only affect your customers’ trust but can severely impact investor confidence, both of which could potentially damage your business’s reputation. With the SEC’s new spotlight on cybersecurity, investors are likely to examine an organization’s security measures more closely. A company with a robust cybersecurity program may give investors more confidence, which could potentially lead to increased investments. If your company does not have adequate security measures, there could be a decline in investor trust and stock prices.

Increased Emphasis on Vendors 

Most companies work with at least one vendor and the new SEC rules put an emphasis on vendor management. Your business will need to assess the cybersecurity practices of your vendors by performing a comprehensive review of every vendor. Depending on the results, you may need to find new vendors with better cybersecurity practices. It is important to ensure all partners meet strong cybersecurity standards, even though this approach may result in higher costs. 

New Cybersecurity Technologies 

The new SEC regulations may spark a surge in demand for advanced cybersecurity solutions as businesses strive to meet these requirements. The higher demand will likely foster innovation in the cybersecurity industry, leading to more effective protection solutions. A company that specializes in cybersecurity technology may find new growth opportunities or collaboration with other industries.  

NIST SP 800-171 Compliance and Its Relevance

The NIST Special Publication 800-171 provides guidelines for protecting controlled unclassified information in nonfederal systems and organizations. This outlines security requirements that are extremely relevant for any business that needs to comply with the SEC’s new cybersecurity rules. Key areas of this publication include access control, awareness and training, incident response and risk assessment among more. Businesses that align with the guidelines can meet the SEC’s requirements and bolster their overall cybersecurity posture. 

Key Security Requirements of NIST SP 800-171 

There are 14 areas of security requirements the NIST SP 800-171 outlines, including:

• Access control: Limit information system access to authorized users. 
• Awareness and training: Ensure users are aware of security responsibilities and risk. 
• Audit and accountability: Create, protect and retain information in system audit records. 
• Configuration management: Create and maintain baseline configuration and inventories.
• Identification and authentication: Identify information system users, devices and processes. 
• Incident response: Establish a plan for incident response. 
• Maintenance: Do routine and timely maintenance on information systems. 
• Media protection: Protect information system media. 
• Personnel security: Ensure all team members are screened or trained. 
• Physical protection: Ensure physical access is limited to information systems. 
• Risk assessment: Routinely assess risk to operations, assets and individuals. 
• Security assessment: Routinely assess the security controls in organizational systems. 
• System and communication protection: Control, monitor and protect all communications. 
• System and information integrity: Identify, report and correct information system flaws. 

Adapting to the New Regulations 

Proactive measures are required to adapt to the new SEC regulations. Your business will need to conduct thorough cybersecurity assessments, which need to include penetration testing to identify gaps in protocols. Investing in advanced cybersecurity technologies and improving or creating your incident response plans are important steps in ensuring cybersecurity compliance. 

Let Us Help You Meet Cybersecurity Compliance

The SEC’s new cybersecurity rules mark a significant moment in the fight against cybercriminals and the attacks they commit. Although the SEC’s regulation will likely pose new challenges to organizations, it will give them the opportunity to strengthen cybersecurity protocols and increase cybersecurity compliance. 
It is important that your organization proactively addresses these challenges. Doing so on your own can be difficult, but a cybersecurity expert like OrlanTech makes it easier. Book a meeting with us today to gain your new partner in cybersecurity.