By August 28, a mere month from now, financial institutions licensed in New York are required to have in place the first series of cybersecurity protections mandated by stringent new regulations issued by that state's Department of Financial Services (NYDFS). The measures required in this first of four phase-in periods stretching through March 1, 2019, include a Cybersecurity Program, underlying Cybersecurity Policies, and an Incident Response Plan, each as intricately prescribed by NYDFS, plus designation of a Chief Information Security Officer (CISO) to oversee them. As to all of the above Phase 1 requirements, except designating the CISO, the regulations also require that by March 1, 2018, they be based on and conform to findings of a comprehensive Risk Assessment not (nominally) due until the latter date. Thus, as a practical matter, the regulations encourage covered entities to have completed the Risk Assessment by end of August too.
Firms that have fewer than 10 employees (including independent contractors) in New York or who have under $5 million in revenues or under $10 million in total assets may, on due notice to NYDFS, be exempt from the requirement to appoint a CISO. Such firms, however, are exempt from other requirements due on August 28, including those discussed above, as well as a related obligation to limit access to nonpublic personal information.
But that is hardly all. As of August 28, all covered entities will also be subject to a 72-hour notice rule that will, in many instances, radically accelerate companies' reporting obligations and processes. In the U.S., the data breach notification laws of the various states have heretofore required companies to notify affected parties or regulators within a "reasonable" but unspecified time and/or a specified time of at least 30 days following discovery. Under New York's new regulations, however, a covered entity must, within 72 hours, notify NYDFS of the entity's determination of the occurrence of a "Cybersecurity Event" that either (1) has "a reasonable likelihood of materially harming any material part of the normal operation(s) of" that company or (2) triggers a separate obligation of the company to report to a "government body, self-regulatory agency or ... other supervisory body." It is the first prong of NYDFS' 72-hour rule that will require covered entities to report incidents far faster than any U.S. regulator had ever before mandated.
Recent surveys indicate that many companies do not believe they will be ready by the August 28 deadline — or even later still.