On September 13, 2019—the last day of the legislative session—California lawmakers approved five amendments intended to clarify the scope of the California Consumer Privacy Act (the “CCPA”), but rejected several industry-backed proposals that would have exempted personal information used for targeted advertising and loyalty programs.

Five amendments passed:  AB 25, 874, 1146, 1355, and 1564. 

Delaware (July 31, 2019) and New Hampshire (August 2, 2019) have become the latest states to add to the insurance cybersecurity landscape by enacting information security laws.  These laws come on the heels of Connecticut’s law enacted a few days earlierNotably, while Connecticut followed the New York Department of Financial Services’ 2017 Cybersecurity

On July 26, 2019, Connecticut Governor Ned Lamont signed into the law the state’s new Insurance Data Security Law, which imposes new information security, risk management, and reporting requirements for carriers, producers, and other businesses licensed by the Connecticut Insurance Department (“CID”).  In doing so, Connecticut joins New York, South Carolina, Ohio, Michigan, and Mississippi

As we turn the page on 2018, let’s reflect on some of the key privacy and cybersecurity issues that will continue to occupy our hearts and minds in 2019.

Owning the Mega-Breach

2018 was the year in which data breaches in mergers and acquisitions became the iceberg in full view. This fuller realization of cyber risk in transactions, though, actually has its origin in September 2016 – when Yahoo and Marriott were in the midst of deals that would involve some of the largest data breaches on record.
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For good reason, there has been much discussion about the new privacy rights created by the California Consumer Privacy Act of 2018 (CCPA), which becomes effective January 1, 2020. Perhaps one of the most significant provisions of the CCPA, though, will be one that has been somewhat overlooked: Section 1798.150, which provides for statutory damages of between $100 and $750 per consumer per incident for certain data breaches. Indeed, had California enacted Section 1798.150 alone, it would have garnered scores of articles on how its statutory damages remedy will likely lead to an explosion in “bet-the-company” private class action litigation over data breaches. The fact that it was enacted as just one provision in a first-in-the-nation privacy law has resulted in commentators spending less time analyzing its impact on businesses.

We will try to remedy this by taking a look at this provision and analyzing how it will apply to businesses covered by the CCPA. We begin by discussing existing California laws that are referenced in the CCPA’s private right of action. We then track the private right of action through its various forms, starting with the ballot measure and ending with its current version as reflected in Senate Bill 1121. Finally, we discuss how the private right of action likely will be used by private litigants and what steps businesses should take to avoid costly litigation.
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On November 13, 2018, Ballard Spahr lawyers presented a webinar on the SEC’s recent “Report of Investigation” into “business email compromises” affecting public companies.

As noted in our prior blog post, the Report was prompted by the SEC’s investigation into whether nine public companies violated U.S. securities laws “by failing to have sufficient accounting controls” to prevent approximately $100 million in losses as a result of business email compromises targeting their personnel. The SEC investigated whether these companies violated Sections 13(b)(2)(B)(i) and (iii) of the Securities and Exchange Act of 1934. Although declining to pursue enforcement actions against the companies, the SEC emphasized its recent cybersecurity guidance, advising public companies that “[c]ybersecurity risk management policies and procedures are key elements of enterprise-wide risk management, including as it relates to compliance with federal securities laws.” (See our prior alert and blog post regarding the Interpretive Guidance).
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The U.S. Securities and Exchange Commission (SEC) has joined the government chorus in sounding the alarm about the rapid rise in “business email compromises” that are victimizing organizations across industry sectors.

On October 16, 2018, the SEC released a “Report of Investigation” calling for public companies to reassess their internal accounting controls “in light of emerging risks, including risks arising from cyber-related frauds.”  In particular, the report focuses on certain types of “business email compromises” (BEC), in which a bad actor uses spoofed or compromised email accounts to trick an organization’s personnel into effectuating wire transfers to financial accounts controlled by fraudsters.
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One of the most bedeviling aspects of data privacy and security law concerns the concept of “reasonable” data security, which has become the default statutory and common law standard.  The FTC began articulating a reasonableness standard in the early aughts, when the Commission first began scrutinizing companies’ data security practices.  Companies for years quietly grumbled about the vagueness of this standard, which isn’t defined in any regulations or federal statutes. Critics obtained a recent victory when the Eleventh Circuit, in LabMD v. FTC, struck down an FTC judgment on grounds that the relief sought by the FTC against LabMD– implementation of reasonable data security practices — was too vague to be enforceable.
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Just as many US businesses were scrambling to meet GDPR compliance, California quickly passed a broad new privacy act, giving businesses another privacy compliance headache. We’ve previously blogged on the dramatic history behind the eleventh-hour passage of the California Consumer Privacy Act (CCPA), so we won’t rehash that story here.  Instead, the focus of this post will be on the overlap between the CCPA and the GDPR. 
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The New York Department of Financial Services (“NYDFS”) has adopted a regulation that requires “consumer credit reporting agencies” (“CCRAs”) to register with the NYDFS, prohibits CCRAs from engaging in certain practices, and requires CCRAs to comply with certain provisions of the NYDFS cybersecurity regulation.
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