The U.S. Securities And Exchange Commision (SEC) finally updated their guidelines for public companies on how and when they need to disclose cyber security risks and breaches. Naturally, this is of paramount importance in an increasingly electronic world where cyber terrorism is the new dirty bomb.
The new guidelines also outlines what company executives can do in terms of trading. Specifically, it makes it clear the executives of public companies can not trade in a firm’s securities while they are in possession of information that the public does not have access to.
While these guidelines don’t include specific language restricting executive trading in shares while a hack is being investigated, it does encourage companies to adopt policies restricting that on their own.
The SEC released their first set of guidelines surrounding cyber disclosure back in 2011. Unfortunately, since that time there has been a massive surge in these breaches, including one at the SEC itself. Clearly, new guidelines are needed. SEC Chairman Jay Clayton spoke about the new guidelines saying that the SEC is unanimously approving the new guidelines.
The new guidelines basically mean that there will be more information available to the public surrounding these cyber attacks and ensures that those with insider information are now allowed to make money off of what they know.
These new trading rules come in the wake of the Equifax scandal that occurred last year. For those unfamiliar, a number of Equifax executives were found to have sold a substantial amount of their shares in the company days before it disclosed a major cyber security breach.
It’s true that these guidelines do not completely address the problem of cyber disclosure, but they are a major step in the right direction.
If you want to inquire about cyber insurance for your company, reach out to TGS Insurance at www.tgsinsurance.com. Their staff will be happy to answer any questions that you may have.