DOJ RESCINDS PRIOR GUIDANCE ON MONITORSHIPS — NO LONGER DISFAVORED

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BIG News Out of DOJ Re: Monitorships: “To the extent that prior Justice Department guidance suggested that monitorships are disfavored or are the exception, I am rescinding that guidance. Instead, I am making clear that the department is free to require the imposition of independent monitors whenever it is appropriate to do so in order to satisfy our prosecutors that a company is living up to its compliance and disclosure obligations under the DPA or NPA.” — Deputy AG Lisa Monaco.

Announcement is here:  https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-o-monaco-gives-keynote-address-abas-36th-national-institute

 

 

 

NYDFS ANNOUNCES PROPOSED REGULATION TO INCREASE TRANSPARENCY IN SMALL BUSINESS LOANS; FIRST BY NEW SUPERINTENDENT

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NYDFS announced a new proposed regulation designed to improve transparency for small businesses seeking commercial loans. The regulation applies to companies offering commercial financing in amounts under $2.5 million, requiring them to make standardized disclosures about credit terms. The regulation implements legislation enacted by the State legislature earlier this year. It is the first proposed regulation issued by recently appointed Acting Superintendent Harris.

 

The proposed regulation may be found here:

https://www.dfs.ny.gov/reports_and_publications/press_releases/pr202109211

 

 

 

Cyber-Enforcement by NYDFS – Insurance Journal Podcast

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Cyber-enforcement by NYDFS and others is only going to get more intense. I had the good fortune to sit down virtually with journalist Elizabeth Blosfield of the Insurance Journal to discuss ramped up enforcement by NYDFS in cybersecurity on the Insuring Cyber Podcast.

 

The link to the podcast episode can be found here: https://www.insurancejournal.tv/videos/19537/

 

Governor Hochul Nominates Adrienne A. Harris to be the Next NYDFS Superintendent

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NYDFS WATCH: Governor Hochul has nominated Adrienne Harris, a former economic advisor in the Obama White House and Treasury Department, to be the next NYDFS Superintendent. While the press release does not specify, each of the past two Superintendents became Acting Superintendent while their Senate nomination was pending.

The link to the nomination announcement is here: https://www.governor.ny.gov/news/governor-hochul-announces-nomination-adrienne-harris-superintendent-department-financial

NYDFS Expected to Take Enforcement Action Against Robinhood Financial

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UPDATE ON NYDFS ENFORCEMENT ACTION VS. ROBINHOOD: There is a deal in principle, according to an amended S-1 filing. Expected penalty is $30MM, and there apparently will be appointment of an independent monitor. Robinhood says NYDFS informed it of alleged violations involving cybersecurity and virtual currency (Part 500 and Part 200) requirements, including deficiencies in policies and procedures regarding risk assessment, lack of an adequate incident response and business continuity plan, and deficiencies in application development security.

A Markets Insider article on the matter can be found here: https://markets.businessinsider.com/news/stocks/robinhood-ipo-30-million-fine-crypto-anti-money-laundering-probe-2021-7

A DEFICIENCY LETTER TO (NOT FROM) THE SEC: PLEASE PROVIDE MORE TRANSPARENCY WHEN CHARGING A CHIEF COMPLIANCE OFFICER WITH PERSONAL LIABILITY

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Its time to send a deficiency letter to the SEC — the agency needs to do a better job of providing transparency when issuing an enforcement action against a compliance officer. See my latest post on the NYU Program on Corporate Compliance & Enforcement Blog.   Link is below: A Deficiency Letter to (Not From) The … Read more

CYBERSECURITY ENFORCEMENT ACTIVITY FROM NYDFS FASHIONS REGULATORY EXPECTATIONS AND SUGGESTS MORE ENFORCEMENT TO COME

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Matthew Levine writes in the New York Law Journal article about “Cybersecurity Enforcement Activity From NYDFS Fashions Regulatory Expectations and Suggests More Enforcement Is To Come”, which updates developments in cybersecurity enforcement by NYDFS.   The article may be found here:  NYLJ-DFS-CYBERSECURITY-ENFORCEMENT-LEVINE

Cyberenforcement Continues at NYDFS — The Insurance Industry Remains in Focus

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On May 12, 2021, NYDFS issued another Cybersecurity enforcement action vs. Unum Life and Paul Revere Life. What you need to know from the findings in the Consent Orde (yes, another settlement):
• The companies must pay a $1.8 million penalty, & conduct remediation and an independent third-party audit
• The relevant Cybersecurity Events occurred in September 2018 and October 2019 – both phishing intrusions; dozens of employee email accounts compromised and NPI of New Yorkers and others made accessible
• The companies did not have effective multi-factor authentication (MFA) in place for the e-mail environment until August 2019, long after the Mar 2018 deadline
• The Consent Order specifically finds the companies “falsely certified compliance with the Cybersecurity Regulation for the calendar year 2018.”  Still, there is no suggestion concerning the actual level of intent underlying false certification, or whether any other consequences flow.
• There is no specific finding regarding the number of violations underlying the penalty; NYDFS finds two subsections of the regulation as violations of law.
• ENFORCEMENT TAKEAWAY:  A big focus on MFA is emerging. If an entity did not implement effective MFA by March 2018, a subsequent Cybersecurity Event involving access to non public information (NPI) is a likely enforcement target. Additionally, the insurance industry remains in focus.

 

The Consent Order may be found here: https://www.dfs.ny.gov/system/files/documents/2021/05/ea20210512_first_unum.pdf

NYDFS Issues Its Report on the SolarWinds Cyber Attack

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On April 27, 2021 NYDFS issued a report on the SolarWinds attack and regulated entities’ response. Per interactions with 100 regulated entities it found that:


• Some NYDFS licensees actually detected the attack before it became public but didn’t share

• No licensee reported that hackers actively exploited the network, consistent with other reporting that financial services companies were not actively targeted

• Licensees responded to the SolarWinds Attack swiftly; 94% of impacted companies removed the vulnerability introduced from their networks within 3 days by disconnecting and/or patching

• Some licensees’ patch management programs are immature and lack proper “patching cadence” needed to ensure timely remediation of high-risk cyber vulnerabilities

• Some licensed entities using its Orion product did not classify SolarWinds as a critical vendor, even though Orion had privileged access to the company’s network

• ENFORCEMENT TAKEAWAY: “This attack confirms the importance of vigorous third party risk management, which starts with a thorough assessment of an organization’s third party risk. . . [Cyber risk ] is an existential threat and we urge the industry to treat it as such.”

 

The report may be found here: https://www.dfs.ny.gov/system/files/documents/2021/04/solarwinds_report_2021.pdf