Articles Posted in Policies and Procedures

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iheartcalifornia-300x138On June 28, 2018, Governor Brown signed the California Consumer Privacy Act of 2018, which goes into effect on January 1, 2020. But – because of certain look-back features in the new law – significant compliance will be required by January 1, 2019.

The Act is enforceable by the California Attorney General and authorizes a civil penalty up to $7,500 per violation.

Observers estimate that about 500,000 companies nationwide will need to comply with the California Consumer Privacy Act. The California Attorney General is expected to aggressively enforce the Act – and it will have the budget to do so. Consumer watchdogs and plaintiffs class-action lawyers will also be on the hunt for violators.

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This is a serious law and violations will have serious repercussions for your bottom line and your reputation.

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The Act provides many of the same consumer privacy protections as the European Union’s General Data Protection Act (GDPR). JMBM’s Cybersecurity & Privacy Group has counseled dozens of companies on GDPR compliance and is now discussing California’s new law with clients; we are eager to help you assess your own compliance and protect your business from expensive liability and litigation.

Some key points:

What does the Act do?

The new act says that California residents, including minors, who give personal data of almost any kind to a for-profit business, have the right to know how the data is being used, have it deleted, know who the data is being sold to, and object to the sale of their data. In short, California consumers now own their personal information and have a significant measure of control over it. It is important to note that personal data includes almost any data that can identify an individual, not just financial data.

Who is subject to the Act?

The California Consumer Privacy Act applies to any for-profit business that:

  • Does business in the state of California;
  • Collects consumers’ personal information (or is the entity on whose behalf such information is collected) and determines how that information is collected and processed;
  • Meets one or more of the following thresholds: has annual gross revenues in excess of $25 million; buys, receives, sells, or shares the personal information of 50,000 or more consumers, households or devices; or, derives 50% or more of its annual revenue from selling consumers’ personal information. The Act applies to small and mid-sized businesses, not just large companies.

What happens if a company does not comply?

The act is enforceable by the California Attorney General and authorizes a civil penalty up to $7,500 per violation.

In the event of a data breach, California residents will have a private right of action to recover up to $750 per incident, or actual damages. The statute directs courts to consider the nature, seriousness, persistence and willfulness of an incident, the number of violations, the length of time over which the incident occurred, and the violating company’s assets, liabilities and net worth.

Because of the minimum recoverable amount, consumers do not have to prove actual damages, only that there was a violation of the act.

What do you need to do now?  

California businesses will need to take several steps to achieve compliance, including:

  1. Adopt a method for handling consumer requests for personal information.
  2. Develop templates and procedures for responding to consumer requests.
  3. Develop procedures for collecting and processing data.
  4. Identify and document the legal basis for collecting and processing personal information, in order to respond to the consumer’s right to have their information deleted.
  5. Make appropriate changes to public-facing website disclosures, including adding a description of consumers’ rights under the Act, listing the categories of data collected, and including a conspicuous way for consumers to indicate that they do not want their data sold.

 What should you do now?

Contact us to discuss whether this new act applies to you, and how you should prepare for it. This is a serious law and violations will have serious repercussions for your bottom line and your reputation.

 

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Michael Gold
Partner and Co-Chair of the Cybersecurity & Privacy Group
310.201.3529
MGold@jmbm.com
Bob Braun Photo
Robert E. Braun
Partner and Co-Chair of the Cybersecurity & Privacy Group
310.785.5331
RBraun@jmbm.com

 

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The stakes have been raised as the EU’s new General Data Protection Regulation, or GDPR, mandates notification within 72 hours. Once that happens, social media and public opinion give you only hours to get it right.

It’s often said that one can do something well, or quickly, but not both.  Corporate America is facing a world where the public demands both speed and accuracy; companies have one chance to get it right, and get it right at once.

Consider the two most recent examples: on April 12, two black men were arrested at a Philadelphia Starbucks after they entered the store and failed to place an order as they waited for a friend to arrive. The arrest was videotaped and posted on Twitter, where it immediately went viral. Within two days, CEO Kevin Johnson was apologizing for “a disheartening situation” that led to a “reprehensible outcome.” On May 29, Starbucks closed all its stores in order to train employees on racial sensitivity and implicit bias. Six weeks later, ABC reacted to an inflammatory, early morning tweet by Roseanne Barr within hours, calling it “abhorrent, repugnant and inconsistent with our values,” and cancelled her top-ranked TV show.

The lesson here is that the initial corporate emergency response time to a public relations calamity shrank from two days to several hours in just over a month.

What does this have to do with cybersecurity? Everything.

Cybersecurity and data breach response plans are all about dealing with a fast-moving and soon-to-be public crisis. Notifications, and therefore publicity, are mandatory. The stakes have been raised as the EU’s new General Data Protection Regulation, or GDPR, mandates notification within 72 hours. Once that happens, social media and public opinion give you only hours to get it right. And as we know so painfully from the Equifax breach, that needs to be done correctly the first time round. Equifax notified the public of its data breach – covering more than 143 million people and attacking its core business – a month after it discovered the breach, and when it did, its reaction was widely criticized. Continue reading

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Welcome to the third article in our series of blogs about blockchain technology and its impact on business practices, corporate governance and cybersecurity.

 

 

In Robert Braun’s article, Blockchain: The good, the bad, and how to tell the difference published by FinTech Weekly, he explores two issues about blockchain that trouble many in the business community: “How secure is blockchain, really?” and “Is it too good for criminals”? He also explains the connection between blockchain and climate change, and offers up some guidelines for adopting blockchain (or investing in its technology). He writes:

“Blockchain has been touted as a disruptive technology that can be used to benefit virtually any transaction, ranging from money transmission to supply chain management, to restaurant reservations.  With its promise of highly secure, private and instantaneous transactions, blockchain would seem to enhance any transfer or transaction. But while blockchain technology has caught the imagination of the public, it is based on an extension of existing technologies, not on something truly new.  It is disruptive, but not in the sense that the creation of mortgage-backed securities or the Internet was disruptive.  Those changes created entirely new opportunities and markets; blockchain is a technique that allows for new ways of doing the same thing.  At the same time, cryptocurrencies – by far, the most popular of blockchain applications – has shown the shortcomings in the technology or, at least, in how it has been adopted.”

To read the full article, see Blockchain: The good, the bad, and how to tell the difference

To read the first article in this series, see So, What is This Blockchain Thing?
To read the second article in this series, see The Four Horsemen of Cryptocurrencies: Volatility, criminal activity, security issues and human error

 

Robert E. Braun is the co-chair of the Cybersecurity and Privacy Law Group at Jeffer Mangels Butler & Mitchell LLP. Bob helps clients to develop and implement privacy and information security policies, negotiate agreements for technologies and data management services, and comply with legal and regulatory requirements. He helps clients to develop and implement data breach response plans, and he and his team respond quickly to clients’ needs when a data breach occurs. Contact Bob at RBraun@jmbm.com or +1 310.785.5331.

JMBM’s Cybersecurity and Privacy Group counsels clients in a wide variety of industries, including accounting firms, law firms, business management firms and family offices, in matters ranging from development of cybersecurity strategies, creation of data security and privacy policies, responding to data breaches and regulatory inquiries and investigations, and crisis management. The Cybersecurity and Privacy Group uses a focused intake methodology that permits clients to get a reliable sense of their cybersecurity readiness and to determine optimal, client-specific approaches to cybersecurity.

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Today’s blog is written by my partner, Louise Ann Fernandez, Chairperson of JMBM’s Labor & Employment Group. Louise Ann helps companies put hiring and employment policies in place — and develops training programs — that help to protect the business against cyber threats.  — Michael A. Gold

Could We Have Seen This Coming?
The Importance of HR to Cybersecurity

Louise Ann Fernandez, Chair, JMBM’s Labor & Employment Law Group

After a cybersecurity breach, second guessing can often turn into a blood sport. The business often blames Human Resources and the HR department is quick to say that they were not given enough information or blames IT. This kind of tension is far too common and nonproductive. Communication and creativity on all sides are essential to identifying and  preventing cybersecurity threats. This article discusses some  simple proactive steps that you can take now to help you recognize potential issues before it’s too late.

IT Hiring

Your IT department is both your first line of defense and greatest vulnerability. Do you really know who is working there? We will cover hiring in general and its role in preventing cybersecurity attacks in another blog, but often problems come because of bad hiring choices in the IT department.  Because there is a shortage of qualified IT personnel and immediate needs must be met, warning signs are often overlooked. Both HR and IT must be trained to carefully analyze the credentials of all IT applicants. You need to look for gaps in employment history, too much job hopping and things that seem inconsistent such as career changes or abnormal job progression. Most importantly, you must do careful reference checks. Do not rely on the headhunter to provide references or do reference checks. They have a conflict and will not be as careful as you would like. References can easily be faked. For example, don’t accept just cell phone numbers. They could be giving you their brother’s number. Ask employees to provide work numbers for all references and call the human resources department of each prior employer to get dates of employment. Although there are more and more restrictions on background and criminal checks, they can still be done if you follow the rules. Make sure you do them. Also, do a careful social media check to see what their online presence looks like. Key warning signs are signs of second jobs that conflict with your business, angry  posts, alternate identities such as “stage names,”  peculiar political affiliations and overactive Twitter or Instagram accounts. Make sure you know all of their email addresses. Continue reading

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At the airport, in a coffee shop or hotel lobby? Think twice before logging on to that free Wi-Fi.

What’s not to love about free, public Wi-Fi?  It’s free. It’s easy. A couple of clicks and you’re connected to the world.

When you’re on the go, there will always be a need to check your email, send a document to a client, touch base with someone in the office, or review the balance in your bank account. You can take care of life’s business from almost anywhere, and public Wi-Fi makes it easy.

Its ease of use makes it a boon to hackers, as well. While you’re taking care of business, so are they.

Earlier this week, I was interviewed by Leonard Lee of Thomson Reuters Legal Current for a 20-minute podcast titled “Dangers of Public Wi-Fi”.  We discussed some of the things that can happen when you’re using public Wi-Fi, including:

  • Spoofing. Rogue computers can spoof you, pretending to be something they’re not, and capture your data when you click on their link.
  • Capturing passwords. More sophisticated hackers can enter your device stealthily and monitor everything you do (capturing keystrokes to passwords, for example).
  • Depositing malware. Hackers can also deposit malware into your computer. This can endanger not only your own data – if you’re connected to your company’s network you’re risking the integrity of data shared by everyone back in the office.
  • Peeking the old fashioned way. And remember, in a public place it’s still possible for hackers to perform a hack the old fashioned way – by looking over your shoulder and reading your screen.

The safest way to go? Don’t use public Wi-Fi. Continue reading

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The cybersecurity breaches this month of Equifax and Deloitte—both firms that tout the value of their data and security acumen—show that no company is immune to hacking.

But there is one thing that smart companies can do, both before and during a breach, and that is to develop and deploy an appropriate narrative when a security disaster strikes. That narrative needs to hew to the facts, take into account the known unknowns, and appeal not to shareholders or the press but to customers and regulators. Done right, these statements can differentiate between a recoverable data breach and a cybersecurity-related corporate disaster.

What makes this so difficult for companies and CEOs is that the right response often goes against all they’ve learned about positioning the company. Let’s dissect those impulses.

  1. Shareholder value is intact. A company sees shareholders as its most important constituency and wants to reassure them. Actually, you have no idea the impact on shareholder value, because you have no idea the full extent of the breach, how the market will receive it, and how customers and regulators will react. Incorporating this concept into any narrative is ill-advised at best.
  2. We have this under control. Company leaders do not want to exhibit weakness. However, as part of an initial statement, there is only a remote chance that the situation is under control. It takes time to learn the extent of a breach, both its breath, duration, and ultimate impact. Far better to say you are working with experts, regulators and consumer advocates to understand the extent of what may have been compromised, and that you are pushing forward diligently in this regard.
  3. We are doing all we can to mitigate the effects. Company executives often have a bias toward action. You may want to do that, but that’s impossible until you discover the scope of the data loss. Regulators are not interested in immediate solutions. They want to know that you are doing all you can to learn about the situation, not the specifics about the Band-Aids or tourniquets. They want to know your long-haul commitment.

Continue reading

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Small businesses understand that they are challenged with all the cybersecurity issues that large companies face. But often they fail to act preemptively under the false assumption that the resources of a large company are necessary to manage cyber threats.  Small businesses are often surprised to learn that effective cybersecurity strategies are within their reach and that, in many cases, small businesses can respond to threats faster and more effectively than large companies.

I recently participated as a speaker for a conference focused on the future of cybersecurity and how small businesses can protect themselves. Ariento’s Up on Cyber 2017 Conference at the UCLA James West Alumni Center was attended by numerous small business owners, and I enjoyed the informed questions posed by the audience.

You can view a video of my 45-minute presentation, the Current Landscape of Cybersecurity Law as it Relates to Small Businesses, in which I cover the following issues:

  • What’s new in data threats
  • Where do your obligations and liabilities come from
  • Privacy Policies – protection and threat
  • Risk Assessment – the first step to risk reduction
  • Cyberinsurance – what and why
  • Responding to a data breach

Like businesses of all size, small businesses are at risk of being hacked. The threat of compromising customer and employee privacy, and the possibility of losing their reputations – not to mention their businesses – are good reasons that all small businesses should act proactively to put cybersecurity programs in place.

 

Robert E. Braun is the co-chair of the Cybersecurity and Privacy Law Group at Jeffer Mangels Butler & Mitchell LLP. Bob helps clients to develop and implement privacy and information security policies, negotiate agreements for technologies and data management services, and comply with legal and regulatory requirements. He helps clients to develop and implement data breach response plans, and he and his team respond quickly to clients’ needs when a data breach occurs. Contact Bob at RBraun@jmbm.com or +1 310.785.5331.

JMBM’s Cybersecurity and Privacy Group counsels clients in a wide variety of industries, including accounting firms, law firms, business management firms and family offices, in matters ranging from development of cybersecurity strategies, creation of data security and privacy policies, responding to data breaches and regulatory inquiries and investigations, and crisis management. The Cybersecurity and Privacy Group uses a focused intake methodology that permits clients to get a reliable sense of their cybersecurity readiness and to determine optimal, client-specific approaches to cybersecurity.

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It’s ironic: when global threats are in the news every day, their ubiquity makes them easy to ignore. Whether they be political threats, climate threats, or data security threats, we can become numb to ever-present risk. Add in the chorus of advice from the growing number of providers, and even those who want to act become paralyzed by choice and complexity.  Cybersecurity is no exception – the daily deluge of breach notices and press reports of massive attacks has made us less, not more, sensitive to the threat.

Crisis fatigue can be compounded with defeatist thinking, believing that no matter what you do, you will still be hacked and have your data compromised.  So it is no surprise that while companies know data security should be a top priority, in reality, it’s easy to focus on more urgent – but less essential – items.

Cybersecurity faces additional hurdles that make it even challenging to address.  By identifying those hurdles, however, firms may be able to overcome these barriers and move forward on the path to minimizing one of the greatest risks your company faces.

Data Security Is Expensive – But Not as Expensive as the Alternative

Implementing a cybersecure environment requires a commitment in technology, training, and adapting to the constant rate of change and upgrading processes. The extra steps needed for the simplest of tasks, such as logging in, add to the daily cost of doing business.

Gartner estimates that worldwide spending on data security this year will hit $90 billion. It’s understandable that a CEO would see that as money lost from corporate value. But these expenditures should be seen  as an investment to preserve corporate value. Breaches are much more expensive and disruptive than the budgeted, planned improvements to systems, which can be controlled and implemented over time.

Intelligent and consistent technology upgrades, combined with regular training for all employees, are, in the end, better for a company’s bottom line than crisis management and costly technology remediation after the fact. Creative corporate leaders reframe the expense question and find budget for what’s vital.

Data Security Seems Really Complicated

For most of us, data security is complicated. We aren’t IT professionals, and venturing into the cybersecurity world is a challenge. Those who suffer any amount of technophobia may assume that they don’t know it and, more dangerously, that they can’t learn it. The technology community can reinforce this fear by speaking a foreign language and using unfamiliar terminology, all of which creates another barrier for non-technical executives and managers who need to understand the issues sufficiently enough to make intelligent decisions. Non-technical company management often feel that they are at the mercy of the IT experts. Even those who master important concepts in data and cybersecurity may doubt that knowledge, as there can be a tendency on the tech side to stress just how complicated things really are, reinforcing the need for their expertise. Continue reading

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Middle-market companies have cultures, goals and business needs that are distinct from larger firms, and nowhere is that more true than with cybersecurity.

Fortune 500 companies and brands with household names are much more likely to recover their reputations following a data breach.  While breaches are costly in financial terms to all companies, the damage to the brand of a middle-market company may not be survivable.  Large companies can weather the storm of negative publicity and loss of reputation, but mid-markets often cannot:  60% of middle-market companies that are hacked are out of business within one year.

This presents a near-paralyzing scenario to middle-market managers – the mere spectre of a data breach presents business risks that are difficult for them to fathom.

In our work with middle-market companies, we’ve developed effective strategies to help companies respond to the risk and protect their vital digital assets.  In fact, when the process is managed well, middle-market companies can respond to cybersecurity threats more quickly and effectively than larger businesses. Continue reading

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Web analytics concept - Multicolor versionWhile there is no nationwide cybersecurity program, the Federal Trade Commission has brought more than 50 actions claiming that the cybersecurity practices of a variety of companies in a variety of industries. While these actions have primarily been administrative and resulted in settlements, and the specifics of each order apply only to the company affected, these actions are instructive as to what the FTC expects of cybersecurity programs.  A byproduct of the FTC’s actions is a guide to companies to create better privacy and security policies and programs.  While these cases don’t necessarily identify how to run “gold-standard” programs, they identify what the FTC expects as minimum standards for efforts to protect data.

The FTC has said that most enforcement actions it has brought involve “basic, fundamental security missteps.” Many are human error, but there are also plenty that show deficiencies in cybersecurity risk assessments and programs.  This piece describes baseline guides; companies should consult qualified counsel for specifics. Engaging counsel itself on these issues is a sign to regulators that a company takes cybersecurity seriously. But doing it correctly depends on engaging top legal counsel and experienced advisors early on.

Human Factor.  No cybersecurity program is ironclad as long as human error exists and the skills of hackers evolve at the same rate as technology itself. But many cybersecurity breaches are the result of more simple mistakes. The FTC requires “reasonable” efforts, not complete security.

It’s also important to note that cybersecurity solutions are not one-size-fits-all, even for companies within the same industry. Prevention programs depend on the unique circumstances and business practices of each company. Regardless of company or industry, however, a demonstrated commitment to security is required, both to satisfy the government and to protect valuable corporate and customer assets.  Continue reading