United States: New York Announces A First-In-The-Nation Cybersecurity Regulation That Will Apply To Banks, Insurance Companies And Other Financial Institutions

On September 13, 2016, New York Governor Andrew M. Cuomo announced a new "first-in-thenation" cybersecurity regulation, which will become effective January 1, 2017. The proposed regulation will require banks, insurance companies and other financial services institutions regulated by the New York State Department of Financial Services to establish and maintain a comprehensive cybersecurity program. The regulation, which will become 23 NYCRR Part 500 (Financial Services Law), is subject to a 45-day notice and comment period before it becomes final.

The proposed regulation requires "each company to assess its specific risk profile and design a program that addresses its risks in robust fashion. "It calls for regulated companies that do not already have such programs in place to "move swiftly and urgently" to adopt one. The onus for compliance will be on senior management, which "must take this issue seriously and be responsible for the organization's cybersecurity program" and "file an annual certification confirming compliance with these regulations."

The proposed regulation contains detailed and particularized requirements with which a "Covered Entity" must comply. That includes any individual or entity operating under or required to operate under a license, registration, charter, certificate permit, accreditation or similar authorization under the banking law, the insurance law or the financial services law.

There are certain, limited exemptions for a Covered Entity with (1) fewer than 1000 customers in each of the last three calendar years, and (2) less than $5,000,000 in gross annual revenue in each of the last three fiscal years, and (3) less than $10,000,000 in year-end total assets, calculated in accordance with generally accepted accounting principles, including assets of all Affiliates.

If the proposed regulation is implemented as written, Covered Entities will have 180 days from the effective date, January 1, 2017, to comply with the new requirements. The full text of the proposed regulation is available online at the Department of Financial Services website. We summarize the key requirements below.

Establishment of a Cybersecurity Program

Under the new regulation, a Covered Entity will have to maintain a cybersecurity program designed to "ensure the confidentiality, integrity and availability of the company's Information Systems." The regulation does not specify the form that the program must take, but requires that it be "designed to perform the following core cybersecurity functions:" (1) identify internal and external cyber risks by, at a minimum, identifying the Nonpublic Information stored on the Covered Entity's Information Systems, the sensitivity of such Nonpublic Information, and how and by whom such Nonpublic Information may be accessed; (2) use defensive infrastructure and the implementation of policies and procedures to protect the company's Information Systems and the Nonpublic Information stored on those Information Systems, from unauthorized access, use or other malicious acts; (3) detect Cybersecurity Events - which are defined broadly to include "any act or attempt, successful or unsuccessful, to gain unauthorized access to, disrupt or misuse an Information System or information stored on an Information System;" (4) respond to identified or detected Cybersecurity Events to mitigate any negative effects; (5) recover from Cybersecurity Events and restore normal operations and services; and (6) fulfill all regulatory reporting obligations.

Adoption of a Cybersecurity Policy

In addition to a cybersecurity program, each Covered Entity must also implement and maintain a written cybersecurity policy. This policy must be reviewed by the board of directors or its equivalent and approved by a Senior Officer of the company. Review and approval of the policy must occur "as frequently as necessary to address the cybersecurity risks applicable" to the company and at least annually. As for the policy itself, it must address (1) information security; (2) data governance and classification; (3) access controls and identity management; (4) business continuity and disaster recovery planning and resources; (5) capacity and performance planning; (6) systems operations and availability concerns; (7) systems and network security; (8) systems and network monitoring; (9) systems and application development and quality assurance; (10) physical security and environmental controls; (11) customer data privacy; (12) vendor and third-party service provider management; (13) risk assessment; and (14) incident response.

Designation of a Chief Information Security Officer

Each Covered Entity is required to designate a Chief Information Security Officer ("CISO"), who must present a written report to the board of directors or its equivalent bi-annually. The report must (1) assess the confidentiality, integrity and availability of the company's Information Systems, (2) detail exceptions to the company's cybersecurity procedures and policies, (3) identify cyber risks to the company, (4) assess the effectiveness of the company's cybersecurity program, (5) propose steps to remediate any inadequacies identified in the company's cybersecurity program, and (6) include a summary of all material Cybersecurity Events that affected the company during the time period addressed by the report.

Penetration Testing and Vulnerability Assessments

As part of its cybersecurity program, a Covered Entity must conduct penetration testing of its Information Systems at least annually and vulnerability assessments of its systems at least quarterly.

Audit Trail Systems

The cybersecurity program must include implementing and maintaining audit trail systems capable of performing certain enumerated functions. Generally, these systems must be able to log user access and system events, as well as permit the reconstruction of financial transactions in the event of a Cybersecurity Event. The company must maintain records produced as part of an audit trail for at least six years.

Access Privileges

As part of its cybersecurity program, a Covered Entity must limit access privileges to Information Systems that contain Nonpublic Information. Only individuals who require access to these systems to perform their responsibilities may be granted access. The regulation requires the Covered Entity to periodically review these access privileges to ensure that they remain up-to-date.

Application Security

The cybersecurity program must include written procedures, guidelines and standards designed to ensure the use of secure development practices for in-house developed applications used by the company, and procedures for assessing and testing the security of all externally developed applications. The CISO must review, assess and update these procedures, guidelines and standards at least annually.

Annual Risk Assessment

A Covered Entity must conduct a risk assessment of its Information Systems at least annually. The risk assessment must be documented in writing and be done in accordance with written policies and procedures. These policies and procedures must include (1) the criteria for evaluating and categorizing identified risks; (2) the criteria for assessing the confidentiality, integrity and availability of the company's Information Systems, including the adequacy of existing controls; and (3) requirements for documenting how identified risks will be mitigated or accepted.

Cybersecurity Personnel and Intelligence

In addition to designating a CISO, a Covered Entity must have sufficient personnel to manage its cybersecurity risks and perform core cybersecurity functions. A Covered Entity may use qualified third-parties to assist with these tasks. With respect to its own cybersecurity personnel, a Covered Entity must provide for and require them to attend regular cybersecurity update and training sessions.

Third-Party Information Security Policy

A Covered Entity must have written policies and procedures designed to ensure the security of Information Systems and Nonpublic Information that are accessible to, or held by, third parties. These policies and procedures must address (1) the identification and risk assessment of third parties with access to Information Systems or Nonpublic Information; (2) minimum cybersecurity practices required to be met by such third parties; (3) due diligence processes used to evaluate the adequacy of cybersecurity practices of such third parties; and (4) periodic assessment, at least annually, of such third-parties and the continued adequacy of their cybersecurity practices.

Multi-Factor Authentication

A Covered Entity must (1) require Multi-Factor Authentication for any individual accessing the Covered Entity's internal systems or data from an external network; (2) require Multi-Factor Authentication privileged access to database servers that allow access to Nonpublic Information; (3) require Risk-Based Authentication to access web applications that capture, display or interface with Nonpublic Information; and (4) support Multi-Factor Authentication for any individual accessing web applications that capture, display or interface with Nonpublic Information.

Limitations on Data Retention

A Covered Entity must have policies and procedures for the timely destruction of any Nonpublic Information that is no longer necessary or required to be retained by law or regulation.

Training of Personnel

A Covered Entity must provide for and require all personnel to attend regular cybersecurity awareness training sessions that are updated to reflect risks identified by the Covered Entity in its annual assessment of risks.

Monitoring of Authorized Users

A Covered Entity must implement risk-based policies, procedures and controls to monitor the activity of Authorized Users and detect unauthorized access or use of, or tampering with, Nonpublic Information.

Encryption of Nonpublic Information

A Covered Entity must encrypt all Nonpublic Information held or transmitted by the Covered Entity both in transit and at rest. To the extent that encryption of Nonpublic Information is currently infeasible, the regulation permits the use of alternative controls for specified amounts of time.

Incident Response Plan

A Covered Entity must have a written incident response plan designed to promptly respond to, and recover from, any Cybersecurity Event affecting the confidentiality, integrity or availability of the company's Information Systems or the continuing functionality of any aspect of its business. The response plan must address (1) the internal processes for responding to a Cybersecurity Event; (2) the goals of the incident response plan; (3) the definition of clear roles, responsibilities and levels of decision-making authority; (4) external and internal communications and information sharing; (5) remediation of any identified weaknesses in Information Systems and associated controls; (6) documentation and reporting regarding Cybersecurity Events and related incident response activities; and (7) the evaluation and revision of the incident response plan following a Cybersecurity Event.

Notification to the Superintendent

A Covered Entity must notify the superintendent of any Cybersecurity Event that has a reasonable likelihood of materially affecting the normal operation of the Covered Entity or that affects Nonpublic Information. The notice must be given as promptly as possible but no later than 72 hours after the Covered Entity becomes aware of the Cybersecurity Event.

Annual Certifications

Beginning in 2018, a Covered Entity must submit to the superintendent by January 15, a written statement certifying that the Covered Entity is in compliance with the regulation. All records, schedules and data supporting the certificate must thereafter be maintained for a period of five years.

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
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
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