Meghan Stoppel, who spent over a decade serving as an Assistant Attorney General, and later a Consumer Protection Chief, to both Democratic and Republican state attorneys generals, talks to Andy Baer, Chair of Cozen O’Connor’s Technology, Privacy and Data Security practice, about how state AGs are weighing in on both policy and enforcement with respect to privacy.
Andy: Meghan, the state privacy legislation landscape is evolving rapidly, as you discussed in your recent article in WestLaw. What other “hot” topics in privacy drew the state AGs’ attention in 2021? How might that affect their priorities in 2022? Are there any takeaways for the business community?
Meghan: No doubt, 2021 was a revealing year. We saw state AGs publicly express concern, in multiple forums, about algorithms and the potential for bias-based discrimination in automated decision-making. A number of AGs called for both cooperation and increased transparency from the business community, while the D.C. Attorney General introduced his own legislation in late 2021 to ban “algorithmic discrimination.” And although the AGs did not announce any formal enforcement actions in this area in 2021, I would not be surprised if investigations are already underway. Businesses that rely on algorithms to make automated decisions should be aware of increased AG attention in this area, especially with respect to essential products and services such as housing and financial products (e.g. credit).
On March 9, 2022, the SEC proposed new rules (“Proposed Rules”) that would expand cybersecurity disclosures applicable to public companies subject to the reporting requirements of the Securities Exchange Act of 1934 (“Exchange Act”). Existing SEC rules do not explicitly require cybersecurity disclosures, and instead provide management with the discretion to reveal information based on materiality assessments. If the Proposed Rules are adopted, these rules would impose new reporting obligations with respect to cybersecurity matters, such as specifically mandating current and periodic reporting of material cybersecurity incidents, and also requiring periodic disclosure of a company’s policies and procedures to identify and manage cybersecurity risks, management’s role and expertise in implementing cybersecurity policies, procedures, and strategies, and the board of directors’ oversight role and cybersecurity expertise, if any.
On November 18, 2021, the Office of the Comptroller of the Currency (“OCC”), the Board of Governors of the Federal Reserve System (“Board”), and the Federal Deposit Insurance Corporation (“FDIC”) (collectively, the “Agencies”) issued a new rule (the “Rule”) that requires banking organizations and their bank service providers to report any “significant” cybersecurity incident within 36 hours of discovery, as set forth in the Federal Register (see 12 CFR Part 53 for the OCC, 12 CFR Part 225 for the Board and 12 CFR Part 304 for the FDIC). Due to the frequency and severity of cyberattacks on the financial services industry, the Rule is intended to promote the timely notification of “computer-security incidents” (as defined below) that may materially and adversely affect entities regulated by the Agencies. The Rule takes effect on April 1, 2022, with full compliance required by May 1, 2022.
On October 27, 2021, the Federal Trade Commission (“FTC”) announced new updates to the Gramm-Leach-Bliley Act (“GLBA”) by amending the Standards for Safeguarding Customer Information, known as the “Safeguards Rule,” and issuing a final rule (the “Final Rule”). The Safeguards Rule is designed to protect the security and integrity of consumer personal information that is collected by financial institutions by ensuring that financial institutions put in place administrative, technical, and physical safeguards to protect personal information. The Safeguards Rule requires financial institutions under the FTC’s jurisdiction to implement measures to keep customer information secure and to ensure that their affiliates and service providers also safeguard customer information in their care.
A recent decision from a federal court in Pennsylvania highlights the importance of a carefully crafted statement of work (“SOW”) when commissioning an investigative report in response to a data security breach. A convenience store chain recently learned this lesson the hard way when it was ordered to produce to plaintiffs’ counsel a report it commissioned from a cybersecurity consultant to determine the scope of a data breach. The store — which is the defendant in a class action stemming from a 2019 malware attack that compromised customer information — argued that the report was protected from discovery under the attorney-client privilege and/or work product doctrine because the consultant was hired by counsel. The defendant had engaged that counsel for advice on any notification obligations flowing from the attack.
While a uniform federal privacy law in the United States continues to be an uncertain prospect overshadowed by other national priorities such as infrastructure and COVID relief, state legislatures have pushed forward with their own privacy regimes, resulting in an increasing patchwork of laws which businesses must parse in order to remain compliant. State legislatures across the country continue to develop and expand privacy protections for their citizens, as Colorado recently became the third state in the USA to create a privacy regime with echoes of the European Union’s General Data Protection Regulation (“GDPR”), and Nevada adjusted its existing data broker law in a manner that will require companies doing business in that state to reassess their exposure and compliance needs.
This is the second installment of our summary of the Virginia Consumer Data Protection Act (“VCDPA”). In our first post, we covered the goals of the law as well as its applicability and thresholds, what qualifies as personal data, the consumer rights created by the VCDPA, and introduced the concepts of controllers and processors. In this post, we address some of the specific requirements for controllers and processors, as well as de-identification and pseudonymization of personal data, and enforcement of the VCDPA.
On May 12, 2021, President Biden issued Executive Order No. 14028, entitled “Improving the Nation’s Cybersecurity”, setting out new and enhanced cybersecurity standards for federal government agencies and the commercial software products utilized by them. The Biden administration’s order comes in the wake of increasingly damaging and sophisticated cyber-attacks on American companies and infrastructure, most notably the recent Colonial Pipeline ransomware attack, which temporarily shuttered the nation’s largest fuel pipeline, creating gasoline shortages and inducing panic-buying at gas stations throughout the southeastern United States. Recognizing the gravity of the cybersecurity threat, President Biden’s order calls for “bold changes and significant investments in [cybersecurity in] order to defend the vital institutions that underpin the American way of life[,]” and identifies “the prevention, detection, assessment, and remediation of cyber incidents [a]s a top priority and essential to national and economic security[.]” The executive order has two main areas of focus: bolstering and harmonizing cybersecurity standards across the federal government, and calling for the creation of new, stricter cybersecurity requirements for commercial software products utilized by federal government agencies.
Virginia recently joined California in enacting a comprehensive data protection law intended to protect the privacy of its residents. The Virginia Consumer Data Protection Act (the “VCDPA”) is scheduled to take effect on January 1, 2023, so impacted businesses have significant lead time to prepare. This is the first of two posts covering the VCDPA.
The VCDPA has two main goals: (1) providing Virginia residents with expanded rights in connection with their personal data, and (2) imposing obligations on businesses, such as securing personal data, limiting use of personal data to disclosed purposes, and flowing down requirements to processors receiving personal data. While many of the details differ, the overall approach of the VCDPA is very reminiscent of the European Union’s General Data Protection Regulation (“GDPR”) but without some of the more prescriptive elements. Businesses with existing GDPR or California Consumer Privacy Act (“CCPA”) compliance programs will be well positioned for VCDPA compliance.
On November 10, the European Data Protection Board (EDPB), the European Union’s top data privacy regulator, issued long-awaited guidance setting out a framework for navigating transfers of data out of the European Economic Area (EEA) in light of this July’s landmark ruling from the Court of Justice of the European Union (CJEU) inData Protection Commissioner v. Facebook Ireland and Maximilian Schrems (otherwise known as Schrems II). The EDPB also issued a document describing the “essential guarantees” that must be respected in order to ensure that interference with data subjects’ privacy and data protection rights through surveillance of transferred data does not “go beyond what is necessary and proportionate in a democratic society.” These two documents outline the risk assessment that companies must make on a case-by-case basis (as required by Schrems II) in order to allow transfers of data out of the EEA, while the first also discusses examples of the supplementary measures that companies can employ, together with standard contractual clauses, binding corporate rules or other legal transfer tools recognized by the EU General Data Protection Regulation (GDPR), to ensure that European data subjects receive an essentially equivalent level of privacy and data protection when their data is transferred out of the EEA.
In the new digital world, individuals and businesses are almost entirely dependent on computer technology and electronic communications to function on a daily basis. Although the power of modern technology is a source of opportunity and inspiration—it also poses huge challenges, from protecting privacy and securing proprietary data to adhering to fast-changing statutory and regulatory requirements. The Cyber Law Monitor blog covers privacy, data security, technology, and cyber space. It tracks major legal and policy developments and provides analysis of current events.
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