United States: SEC Releases Updated Cybersecurity Guidance

The U.S. Securities and Exchange Commission on Feb. 21, 2018, issued interpretive guidance on public company cybersecurity disclosures. 

The new guidance will affect public companies and companies seeking to go public in three key areas:

  • Disclosure in periodic reports and registration statements
  • Maintenance of disclosure controls and public reporting processes
  • Impact on insider trading procedures


Cybersecurity has been an area of focus by the SEC for several years. The most recent formal statement from the SEC was provided by the Division of Corporation Finance in 2011. That guidance stressed the obligation for reporting companies to make appropriate disclosures regarding the risk of cybersecurity events, and in particular the consequences of any events that have occurred. 

Recent commentary by senior officials indicate that cybersecurity matters have become an area of increased focus for the SEC. For example, in September 2017, SEC Chairman Jay Clayton issued a statement highlighting the importance of cybersecurity to the agency and market participants and detailing the agency's approach to cybersecurity as an organization and as a regulatory body.1 We believe that the release of the new guidance indicates that cybersecurity will be an area of increased focus by the SEC in its review of periodic reports and registration statements.

The new guidance does not create specific new disclosure obligations and largely covers the same disclosure topics as the prior guidance, offering similar recommendations. However, the fact that the SEC issued this guidance suggests this will be an area of increased focus. In addition, the new guidance notes that it addresses two topics not covered in the prior guidance: maintenance of effective disclosure controls and procedures (DCPs)2 to enable accurate and timely disclosure of material cybersecurity events and insider trading implications of the occurrence of cybersecurity events. 


Disclosure in Registration Statements and Periodic Reports

While the prior guidance focused on the need to address the risks and costs of cybersecurity considerations, the focus was largely on disclosure required after a cybersecurity event occurred. For example, it noted that discussion in a risk factor to the effect that a cyberattack may occur would likely be insufficient disclosure for a company that had experienced a material cyberattack. In such a case, to put the risk discussion in appropriate context, the SEC believed that the company would likely need to refer to the prior event so that investors could appreciate the nature of the risk faced.

The new guidance continues to address the need to provide appropriate context for cybersecurity disclosures by including descriptions of known events. However, it devotes equal attention to the need to discuss the cybersecurity threats and the consequences of cybersecurity compliance. For instance, it refers to consideration of such disclosures as:

  • Probability of occurrence and potential magnitude of cybersecurity incidents
  • Adequacy of preventative actions taken and limits on the company's ability to mitigate cybersecurity risks
  • Costs associated with maintaining cybersecurity protections
  • Potential for reputational harm
  • Existing or pending laws regarding cybersecurity matters to which the company is subject
  • Litigation, regulatory investigation and remediation costs associated with cybersecurity incidents

The new guidance also refers to the potential obligation to discuss cybersecurity concerns as part of the disclosure of the board of director's role in risk oversight.3 The SEC states that to the extent that cybersecurity risks are material to a company's business, this risk oversight disclosure should include the nature of the board's role in overseeing management of cybersecurity risk. 

While the occurrence of a cybersecurity incident does not trigger a mandatory filing of a current report on Form 8-K, the new guidance encourages companies to voluntarily report cybersecurity matters promptly on a voluntary Form 8-K filing. This would be of particular relevance to companies with shelf registration statements on file and in use. 

Disclosure Controls

The first of the two "new" topics addressed in the new guidance, maintaining effective DCPs, was already covered in the prior guidance, but the focus was on the risk of these controls being compromised by an event. The new guidance addresses DCPs from a different angle. It stresses the need for DCPs that will allow information about cybersecurity risks and incidents to be processed on a timely basis and, as necessary, reported "up the corporate ladder" so that senior management can make timely decisions regarding required disclosure. Although the new guidance acknowledges that for a variety of factors, such as cooperation with law enforcement, timely disclosure does not necessarily mean immediate disclosure, the guidance counsels companies to assess their DCPs to ensure that information about potentially serious events will be brought to the attention of senior management for disclosure consideration.

Insider Trading

The second new topic, insider trading, was not addressed in the prior guidance. The obvious concern in this regard is that insiders of a company that has sustained a material cyber event refrain from trading in the company's securities until that event has been disclosed. The more nuanced concern is related to the potential gap between when a company experiences an event and when it determines that the event has had, or is likely to have, a material effect on the company. The new guidance states that companies "would be well served by considering how to avoid the appearance of improper trading during the period following an incident and prior to the dissemination of disclosure." 


Public companies and companies preparing to go public will be well advised to evaluate their cybersecurity disclosures with the new guidance in mind. Further, companies will want to reassess their disclosure controls to ensure that material and potentially material cybersecurity matters are brought to the attention of senior management so that timely disclosure decisions can be made. Members of your Fenwick & West team, and any of the authors of this alert, are prepared to assist in these efforts.


1 See the SEC's September 2017 Statement on Cybersecurity

2 See Exchange Act Rules 13a-15(e) and 15d-15(e).

3 See Item 407(h) of Regulation S-K and Item 7 of Schedule 14A.​​​​​​​

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.

Events from this Firm
25 Sep 2018, Conference, California, United States

We're excited to introduce Women's IP Strategy, a 2-day conference that tackles both the IP, legal as well as broader career development obstacles, risks and rewards for women lawyers working in male-dominant industries.

2 Oct 2018, Webinar, California, United States

This CLE webinar will offer suggestions to litigators to help them comply with the new GDPR during e-discovery.

10 Oct 2018, Webinar, California, United States

For the past years, 3D printing has significantly revolutionized the business industry as it provides innovations and improvement to pre-existing processes.

Similar Articles
Relevancy Powered by MondaqAI
Cadwalader, Wickersham & Taft LLP
Shearman & Sterling LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Cadwalader, Wickersham & Taft LLP
Shearman & Sterling LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
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.


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.


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