Public companies will shoulder the potentially costly burden of a new federal rule giving them just four days to report a cybersecurity incident—a nightmare for organizations that lack a sound framework for managing data security.
Although likely to spur more consistent and earlier reporting of data breaches, the Securities and Exchange Commission (SEC) rule also provides red meat for shareholder lawsuits and likely will prompt insurers to impose more stringent underwriting standards against such claims.
"Registrants are almost certain to face more lawsuits alleging breach of duty of oversight claims," Reed Smith warned in a client advisory last week.
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