United States: New York Department Of Financial Services Signals New Cybersecurity Regulations

The New York Department of Financial Services ("the DFS") released a letter this week outlining expected cybersecurity regulation requirements for the financial institutions it regulates -- which include, among other entities, state-chartered banks, insurance companies, and mortgage brokers, originators and servicers -- and seeking collaboration with other regulators on such matters. The proposal is aimed at "increasing cyber security defenses" within the financial sector by requiring mandatory quarterly audits, multifactor authentication, and comprehensive written policies and procedures, as well as imposing more stringent requirements for cyber incident notification and the management of third-party service providers. The letter does not formally propose or introduce regulatory text or commence any public review-and-comment period.

The DFS's November 9 letter, addressed to eighteen other federal and state regulators and standard-setting bodies, and also disseminated publicly by the DFS, is intended to "spark additional dialogue, collaboration and, ultimately, regulatory convergence among our agencies on new, strong cyber security standards for financial institutions." Among the addressees were the U.S. Securities and Exchange Commission, the Federal Reserve Board of Governors, the U.S. Department of the Treasury, the National Association of Insurance Commissioners and the U.S. Consumer Financial Protection Bureau. Referring to a "demonstrated need for robust regulatory action in the cyber security space," the DFS stated its intent to coordinate with other federal and state agencies to develop a comprehensive cybersecurity framework.

In highlighting the need for regulatory action, the DFS pointed to research it has conducted in recent years, including several surveys of banking organizations and insurers regarding their cybersecurity practices. The findings from these surveys led the DFS to expand its information technology examination procedures, which included conducting risk assessments of financial institutions. In its proposal, the DFS stressed that its findings raised concerns about regulated companies' susceptibility to cyber-attacks -- particularly since these institutions often rely heavily on third-party service providers for critical banking and insurance functions. As the DFS noted, "A company may have the most sophisticated cyber security protections in the industry, but if its third-party service providers have weak systems or controls, those protections will be ineffective."

While noting that its proposal is not intended to be exhaustive and "may be subject to further revision," the DFS set forth the following expected cybersecurity regulation requirements:

  • Cybersecurity Policies and Procedures: Covered entities would be required to implement and maintain written cybersecurity policies and procedures addressing twelve specified areas, including data governance and classification, customer data privacy, vendor and third-party management, and incident response. Covered entities would also have to ensure that these policies and procedures cover third-party service providers, as well as any applications utilized by the entities..
  • Management of Third-Party Service Providers: Covered entities would be required to implement and maintain policies and procedures to ensure the security of sensitive data accessible to thirdparty service providers, including requiring "minimum preferred terms" in service contracts that call for the use of encryption, the ability to conduct vendor audits, third-party representations, and warranties and indemnification of the entity in the event of a cybersecurity incident that results in loss.
  • Multi-Factor Authentication: Covered entities would be required to implement multi-factor authentication for both internal and external access.
  • Designated CISO: Covered entities would be required to designate a chief information security officer ("CISO") to oversee and implement cybersecurity policies and procedures. The CISO would also be required to submit an annual report to the DFS, reviewed by the company's Board of Directors, assessing the cybersecurity program and risks.
  • Cybersecurity Personnel and Training: Covered entities would be required to employ qualified personnel capable of managing the company's cybersecurity risks and would need to provide mandatory training to such personnel. The use of third parties to meet these requirements is permitted.
  • Quarterly and Annual Audits: Covered entities would be required to conduct annual penetration testing and quarterly vulnerability assessments, in addition to maintaining an audit trail system. The audit trail system must log privileged user access to critical systems, protect log data and the integrity of hardware from alteration or tampering, and log system "events," such as access and alterations made to the audit trail.
  • Cyber Incident Notification: Covered entities would be required to immediately notify the DFS of any cyber incident that has a "reasonable likelihood of materially affecting the normal operation of the entity," including any cyber incident that (i) involves the notification of the company's Board of Directors; (ii) triggers other notification provisions under New York law; or (iii) compromises private information, nonpublic personal health information, payment card information or any biometric data..

The DFS invited feedback from the eighteen addressees on its regulatory proposal, emphasizing that cybersecurity is "a global concern that affects every industry at all levels." In the coming weeks and months, we expect other federal and state regulators to weigh in on the DFS proposal. In addition to existing DFS regulations concerning cybersecurity and customer privacy, it is important to note that many of the agencies addressed in this letter have already themselves issued cybersecurity regulations and guidance. It is not clear from the November 9 letter how, if at all, new cybersecurity requirements will be integrated with existing regulations, or whether such regulations will themselves be subject to amendment. The broad list of recipients of the letter only highlights the number and breadth of government regulators focused on cybersecurity concerns within the financial sector.

The full text of the November 9, 2015 DFS cybersecurity proposal is available here:

http://www.dfs.ny.gov/about/letters/pr151109_letter_cyber_security.pdf

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
White & Case LLP
Lewis Brisbois Bisgaard & Smith LLP
Thompson Coburn LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
White & Case LLP
Lewis Brisbois Bisgaard & Smith LLP
Thompson Coburn LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions