Unlike the European Union, the US has no single federal law that regulates information security/ cybersecurity and privacy throughout the country. Several states have their own cybersecurity laws in addition to their data breach notification laws. These areas are currently regulated by a patchwork of industry-specific federal laws and state legislation whose scope and jurisdiction vary.
The challenge of compliance for organizations that conduct business across all 50 states and potentially across the world is considerable.
This page provides a summary of applicability, penalties, and compliance requirements that pertain to key federal laws that concern cybersecurity and privacy professionals.
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Sarbanes-Oxley
15 U.S. Code Chapter 98
The Sarbanes-Oxley Act (SOX)) requires organizations to prove their cybersecurity credentials.
Applicability: SOX applies only to public companies.
The purpose of the legislation and regulations are to make sure these companies produce accurate financial statements from public companies.
Penalties and enforcement:
SOX has very tough penalties. Unlike many other cybersecurity or privacy statutes, SOX has criminal penalties. In theory, a CEO and CFO can be liable for maximum penalties of $1 million and ten years’ imprisonment for a false certification, and $5 million and 20 years for a willfully false filing.
Compliance:
The following five components of internal controls are generally thought to be required. Read more >>
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Control environment: A set of standards, processes, and structures to provide the basis for applying internal controls across the organization.
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Risk assessment: This dynamic, iterative process identifies stumbling blocks to achieving the company's strategic objectives and forms the basis for determining how risks will be managed.
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Control activities: Policies and procedures to help make sure that management's directives to mitigate risks to the organization’s objectives are carried out.
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Information and communication: Relevant and quality information supports the internal control process. Management needs to continually obtain and share this information with people inside and outside of the company.
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Monitoring: Management should routinely evaluate whether each of the five components of internal controls is present and functioning.
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SEC Regulation S-P: Privacy of Consumer Financial Information and Safeguarding Personal Information
17 CFR Part 248, Subpart A
SEC Rule 30, which is part of Regulation S-P (17 CFR 248.30), is an information security regulation, which requires appropriate cybersecurity measures.
Applicability:
SEC Rule 30 applies to US and foreign brokers, dealers, investment companies, and investment advisers that are registered with the SEC. These organizations could also be subject to the concurrent jurisdiction of the New York Department of Financial Services (NYDFS) cybersecurity regulations (23 NYCRR 500). Under SEC Rule 30, organizations must adopt written policies to safeguard customer records and protect against unauthorized access.
Penalties and enforcement:
Civil fines for violating this regulation can be up to $1,098,190 or triple the monetary gain. This rule can be enforced by an SEC action or by the Financial Industry Regulatory Authority (FINRA). FINRA is a private corporation that acts as a self-regulatory organization for the financial industry. It has the contractual power to fine its members.
Compliance:
Rule 30 of Regulation S-P requires organizations to have written policies and procedures that: Read more >>
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Ensure the security and confidentiality of customer records and information
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Protect against any anticipated threats or hazards to the security or integrity of customer records and information
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Protect against unauthorized access to or use of customer records or information that could result in substantial harm or inconvenience to any customer
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Provide initial and annual privacy notices to customers describing information sharing policies and informing customers of their rights
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Limit disclosures to third parties and reuse
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Properly dispose of the information by taking reasonable measures to protect against unauthorized access to or use of the information in connection with its disposal
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SEC Regulation S-ID: Identity Theft Red Flag Rule
17 CFR Part 248, Subpart C
SEC Regulation S-ID (17 CFR 248, Subpart C) is a cybersecurity law.
Applicability:
It applies to financial institutions and creditors (including broker-dealers, investment companies, and investment advisers). The purpose of SEC Regulation S-ID is to require organizations to develop programs designed to detect, prevent, and mitigate identity theft.
Penalties and enforcement:
SEC Regulation S-ID is subject to the same penalty as S-P. Civil fines for violating this regulation can be up to $1,098,190 or triple the monetary gain. This rule can be enforced by a SEC action or by FINRA.
Compliance:
The organization’s written identity theft prevention program must include the following elements: Read more >>
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Identify, detect, and respond to any pattern, practice, or specific activity that indicates the possible existence of identity theft (red flags).
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The program must involve the board of directors or a designated senior manager empowered to train staff to effectively implement the program. The board or the manager must also maintain effective oversight of the program.
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GLBA: Gramm-Leach-Bliley Act
15 U.S. Code Subchapter I
Gramm-Leach-Bliley Act (GLBA) is both an information security and a privacy law.
Applicability:
The law applies to financial institutions, but the definition is very broad. Included within the definition are banks, insurance companies, securities firms, non-bank mortgage lenders, auto dealers, and tax preparers.
There is a Security Rule and a Privacy Rule. The Security Rule (16 CFR Part 314) requires organizations to “implement, and maintain a comprehensive information security program that is written in one or more readily accessible parts and contains administrative, technical, and physical safeguards that are appropriate to your size and complexity, the nature and scope of your activities, and the sensitivity of any customer information at issue.” (15 USC §6801 (a)) Read more >>
Penalties and enforcement:
Penalties for violation could be in excess of $1 million. There is also the possibility of termination of FDIC insurance, which could mean the end of the business for a financial firm.
Compliance:
The methods to achieve compliance are set out in the Interagency Guidelines Establishing Information Security Standards (12 CFR Appendix B to Part 30) (see also Federal Reserve Regulations).
These rules were later the basis for rules established under the Federal Information Security Management Act of 2002 (FISMA), and in the HIPAA Security Standards issued by the Department of Health and Human Services. The Security Rule is similar to many recognized cybersecurity frameworks. It requires financial institutions to do the following:
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Involve the board of directors
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Conduct a risk assessment
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Apply risk management and controls
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Conduct regular staff training
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Obtain oversight of service providers
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Implement a written security incident response plan
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Apply periodic reviews and updates
The law also institutes a Privacy Rule. The Privacy Rule (12 CFR 1016) requires financial institutions to undertake certain activities to protect consumer rights.
Enforcement of the GLBA depends on the type of financial institution that is being regulated and on what is being regulated: the Security Rule or the Privacy Rule. For the former, banks are regulated by federal banking regulators including Federal Reserve, Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), Office of Thrift Supervision (OTS), and National Credit Union Administration (NCUA).
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FTC: Federal Trade Commission Act §5
15 U.S. Code § 45
Like the GLBA, the FTC Act Section 5 is both an information security regulation, (which requires appropriate cybersecurity measures) and a privacy law.
Applicability:
The law applies to almost every organization in the US with the exception of banks and common carriers.
Penalties and enforcement:
The FTC is not shy about imposing civil liabilities, which have even reached a hundred million dollars. It might seem odd that a law passed in 1914 to prohibit unfair or deceptive acts is one of the major sources of cybersecurity and privacy law in the US. Read more >>
Since its founding, the FTC has interpreted “unfair or deceptive” broadly and this has, for the most part, been upheld by the US courts.
For cybersecurity and privacy, the FTC has alleged that companies acted deceptively by making material and false statements about their data security practices that misled consumers, and it has claimed that companies acted unfairly when allegedly lax data security practices caused (or were likely to cause) sensitive consumer information to be stolen through security breaches.
The FTC relies on two authorities to enforce data security compliance: its statutory authority to police unfair and deceptive acts or practices under Section 5 of the FTC Act, and its authority to enforce its safeguards regulations promulgated under the GLBA.
Compliance:
The problem is that organizations must engage in all “reasonable and necessary” security practices, but these are generally undefined.
The FTC has promulgated a regulation, the Safeguards Rule (16 CFR 314) for companies within its jurisdiction that have to comply with the GLBA. This rule is the same as the Security Rule (see above) and would be a good start to determine a company’s responsibilities under the act.
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HIPAA: Health Insurance Portability and Accountability Act
45 CFR Part 160, 45 CFR Part 164
Like many other federal laws, HIPAA also has security, privacy, and breach notification rules.
Applicability:
The law applies to a health care provider, a health plan, a health care clearing house, and, in certain cases, business associates of these types of businesses called covered entities. So, the act can cover organizations as diverse as a health insurance company to a pharmaceutical company. Unlike other laws, HIPAA has very specific rules to determine compliance.
Penalties and enforcement:
Fines depend on the nature and extent of the violation as well as the extent to which the organization has attempted to protect information. The largest fine to date was more than $5 million.
Compliance:
The security rule requires that: Read more >>
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The confidentiality, integrity, and availability of electronic protected health information (ePHI) be protected. ePHI only consists of individually identifiable health care information that is produced, saved, transferred, or received in electronic form
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ePHI must be protected with administrative safeguards
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ePHI must be protected with physical safeguards
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ePHI must be protected with technical safeguards
The privacy rule requires that ePHI can only be used or disclosed in the following cases:
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The individual gives their consent
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For treatment, payment, or health care operations
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Incident to a permitted disclosure
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Public interest
The breach notification rule has specific requirements:
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Individuals to be notified within 60 days of the discovery of a breach
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Notification has to include the type of information compromised, steps the individual needs to take to protect
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themselves, description of what the covered entity is doing to investigate and mitigate the breach, and contact information
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Breaches of more than 500 individuals require notification to the media and to the Secretary of Health and Human Services (HHS)
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Breaches of fewer than 500 individuals should be logged and reported to the Secretary of HHS once a year
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DFAR: Defense Federal Acquisition Regulation
48 CFR 252.204-7012 – Safeguarding covered defense information and cyber incident reporting.
Applicability:
This regulation applies to US Department of Defense (DoD) contractors. It requires contractors and subcontractors that possess, store, or transmit “covered defense information” to provide adequate security to safeguard the covered defense information on its unclassified information systems.
Penalties and enforcement:
Failure to comply may result in debarment. Read more >>
Compliance:
Unlike many other cybersecurity laws, the regulation mandates compliance with a specific cybersecurity standard: the National Institute of Standards and Technology (NIST) Special Publication (SP) 800-171, Protecting Controlled Unclassified Information in Nonfederal Information Systems and Organizations (see Appendix D of NIST 800-171 for reference to other cybersecurity frameworks including ISO 27001).
Compliance with NIST SP 800-171 is mandatory for minimum compliance:
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The Regulation requirement extends mandatory compliance to all subcontractors
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All contractors and subcontractors must comply with NIST 800-171 by December 31, 2017
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The Regulation provides a detailed process for investigating and reporting the cyber incident to the DoD and the prime contractor (or next higher-tier subcontractor), including protecting and preserving evidence that includes the malware for possible forensic analysis
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COPPA: Children's Online Privacy Protection Act
15 U.S. Code Chapter 91, 16 CFR Part 312
The Children's Online Privacy Protection Act (COPPA) is a privacy and a cybersecurity law.
Applicability:
COPPA applies to websites and online services that are directed at children under the age of 13. It also applies if the operator of the site has actual knowledge that children under the age of 13 are using a website. The purpose of the Act is to regulate how these websites collect, use, and/or disclose personal information from and about children.
Penalties and enforcement:
The Act is enforced by the FTC. Fines have been increasing.
Compliance:
Before websites and online services can collect any information about children they must do the following:
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Obtain verifiable parental consent before any collection, use, and/or disclosure of personal information from children
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Provide a reasonable means for a parent to review the personal information collected from a child and to refuse to permit its further use or maintenance
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Not make the child's participation in a game, the offering of a prize, or another activity cannot be a condition for a child to provide information
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Provide reasonable procedures to protect the confidentiality, security, and integrity of personal information collected from children
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Provide notice of what information the website collects from children, how it uses such information, and its disclosure practices for such information Read more >>
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FDA: Regulations for the Use of Electronic Records in Clinical Investigations
21 CFR Part 11
The Food and Drug Administration (FDA) Regulations for the Use of Electronic Records in Clinical Investigations is a cybersecurity law.
Applicability:
It applies to organizations involved in clinical investigations of medical products, including sponsors, clinical investigators, institutional review boards (IRBs), and contract research organizations (CROs).
Most, if not all, of these people and organizations are also health care providers, so their operations would most likely fall under the HIPAA rules as well. It concerns the IT systems of these organizations, including any electronic systems used to create, modify, maintain, archive, retrieve, or transmit records used in clinical investigations.
Penalties and enforcement: Read more >>
The Regulations are enforced by the FDA, which will conduct investigations and audits. Since these records are to be used for validating the research by the FDA, the Regulations are geared more toward the integrity part of the confidentiality, integrity, availability triad.
Compliance:
The Regulations require the following:
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Systems ensure accuracy, reliability, and consistent performance
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Limiting system access to authorized individuals
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Audit trails
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Establishing and adhering to written policies that hold individuals accountable
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Training
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CFTC: Commodity Futures Trading Commission Derivatives Clearing Organizations Regulation
17 CFR Part 39, Subpart B, 17 CFR 39.18 - System safeguards
Applicability:
The CFTC Regulation applies to derivatives clearing organizations. These entities act as a medium for clearing transactions in commodities for future delivery or commodity option transactions. There are about 27 worldwide. These markets are at the heart of the global financial system.
Penalties and enforcement:
SEC regulation S-ID is subject to the same penalty as S-P. Civil fines for violating this Regulation can be up to $1,098,190 or triple the monetary gain. This rule can be enforced by an SEC action or by FINRA.
Compliance:
To protect themselves, derivative clearing organizations must develop an extensive and robust information security program that includes the following: Read more >>
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An annual compliance report that must be sent to the board and CFTC
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Vulnerability testing of independent contractors twice every quarter
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Internal and external penetration testing at least annually
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Control testing once every three years
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Annual security incident response plan testing
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Annual enterprise technology risk assessment (ETRA)
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ECPA and SCA: Electronic Communications Privacy Act and Stored Communications Act
18 U.S. Code Chapter 119 and 18 U.S. Code Chapter 121
The Electronic Communications Privacy Act (ECPA) together with the Stored Communications Act (SCA), also known as the Wiretap Act, are privacy statutes.
Applicability:
Originally designed to limit warrantless surveillance, these acts forbid the intentional use, disclosure, or access to any wire, oral, or electronic communication without authorization.
Penalties and enforcement:
The acts provide criminal penalties that could be used to jail malicious hackers. They also provide a private right of action. Read more >>
Both the SCA and ECPA acts authorize equitable relief, damages, punitive damages, attorney’s fees, and costs. So compliance with these statutes should be considered by all organizations, not just law enforcement agencies. There are business and intra-family exceptions, but these must be used cautiously.
Both statutes require intentional violation. But if the statutes are violated and if the plaintiff or the plaintiff’s class can prove measurable damages, the liability could be very large.
There are also state laws that go further. The ECPA requires one-party authorization. Ten states require both parties to consent. A recent example of the potential impact of these laws is a lawsuit by a Lyft driver and his class, which are suing Uber for intentionally accessing information with Uber’s Hell software. There are damages for the entire class as well as punitive damages that could easily be in the millions. This is far greater than any criminal or civil fine.
Compliance:
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Policies should prohibit recording or disclosing any oral or electronic communications without obtaining consent from both parties
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Policies should prohibit surveillance of non-employees unless there is consent
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Polices allow surveillance, including video and email interception of employees, if there is a valid business reason for doing so
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EU-US Privacy Shield
Applicability:
The Privacy Shield was developed to protect EU residents’ data held and processed by organizations in the US. The protection of an individual’s data in the US does not come anywhere near what the EU considers adequate.
Since an enormous quantity of data is exchanged between the US and the EU, the US government and EU commissioners came up with a method to circumvent the previous Data Protection Directive with a program called Safe Harbor. The Safe Harbor agreement was overturned on October 6, 2015 by the European Court of Justice (ECJ), so the EU commissioners and US government had to act quickly to come up with an alternative that will meet the requirements of the EU’s General Data Protection Regulation (GDPR). Read more >>
The European Commission adopted the EU-US Privacy Shield framework on July 12, 2016 and it came into effect the same day. The adoption did not stop the criticism. In April 2017, the European Parliament's Civil Liberties, Justice, and Home Affairs Committee (LIBE Committee) narrowly voted in favor of a resolution declaring the Privacy Shield inadequate, and is currently under review.
Penalties and enforcement:
Non-compliance with the GDPR can lead to fines of up to 4% of annual global turnover or €20 million – whichever is greater.
Compliance:
While the Privacy Shield is being contested, to self-certify, a company must undertake the following:
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Confirm that it is eligible. Most companies outside of the financial sector are
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Develop a Privacy Shield-compliant privacy policy statement and make sure that the organization's privacy policy conforms to the Privacy Shield principles
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Identify the organization’s independent recourse mechanism to enforce the privacy policy
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Make sure that the privacy policy is publicly available
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Make sure the organization has a compliance verification mechanism
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Designate a contact within your organization regarding the Privacy Shield
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Submit your organization's self-certification to the Department of Commerce
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FPA: Privacy Act of 1974
5 U.S.C. ch. 5 § 552a
The Privacy Act is a privacy act.
Applicability:
The FPA applies only to agencies of the US Federal Government. It governs the collection, maintenance, use, and dissemination of personally identifiable information about individuals that is maintained in systems of records by federal agencies.
It prohibits the disclosure of information from a system of records controlled by the federal agency absent of the written consent of the subject individual, unless the disclosure is pursuant to one of 12 statutory exceptions. Until recently, it only applied to lawful residents of the US. Read more >>
However, it was amended by the Judicial Redress Act, which allows citizens of ‘covered countries’ as determined by the Attorney General, with the concurrence of the Secretary of State, the Secretary of the Treasury, and the Secretary of Homeland Security, to sue in a federal court for willful disclosures of personally identifiable information by a federal agency.
According to the European Commission, “The EU-US Umbrella Agreement, entered into force on 1 February 2017. To finalize this agreement, the US Congress adopted a new law, the US Judicial Redress Act, which extends the benefits of the US Privacy Act to Europeans and gives them access to US courts.”
But since the FPA is limited to the US government, and since it does not preclude §702 of the FISA, it does not stop either the US National Security Agency (NSA) or private companies from obtaining, disclosing, or transferring personally identifiable information that is expressly prohibited by the GDPR.
Penalties and enforcement
Covered persons, which includes lawful residents of the US and citizens of certain foreign countries designated by the US Secretary of State, may sue in a US federal district court for actual damages or $1,000 (whichever is greater), attorney fees, and court costs. The court may also require the federal agency to amend or correct any information on file concerning the covered person.
Compliance
All US federal agencies must:
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Not disclose any record that is contained in a system of records by any means of communication to any person, or to another agency, except pursuant to a written request by, or with the prior written consent of, the individual to whom the record pertains
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Allow any individual to gain access to their record or to any information pertaining to them that is contained in the system, permit them and upon their request, a person of their own choosing to accompany them, to review the record and have a copy made of all or any portion thereof
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Maintain any record concerning any individual except with accuracy, relevance, timeliness, and completeness
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Assure fairness in any determination relating to the qualifications, character, rights, or opportunities of, or benefits to, the individual