With corporate data security breaches on the rise, the New York State Department of Financial Services (NYDFS) has adopted rules requiring financial institutions to take certain measures to safeguard their data and inform state regulators about cybersecurity incidents. Intended to thwart future cyberattacks and protect consumers, those “Cybersecurity Requirements for Financial Services Companies” (the “Cybersecurity Rule” or “Rule”) finally took effect on March 1, 2017. The NYDFS has released guidance on how to follow the Rule, it comes in the form of frequently asked questions (FAQs) and a summary of key compliance dates. Although the guidance is apparently intended to assist covered financial institutions as the clock ticks towards the first of the Rule’s phased compliance deadlines less than six months away, the guidance is unlikely to make the implementation challenges many financial institutions will face any less daunting.
The Cybersecurity Rule requires that covered financial institutions, among other things, adopt detailed programs, policies and procedures to protect Information Systems (which are defined to include essentially any computer or networked electronic system) and certain sensitive business and consumer information (“Nonpublic Information”) from cybersecurity threats.
The Rule is narrower and less prescriptive than the original proposal from September 2016 (and largely the same as the second proposal from December 2016). Nonetheless, covered financial institutions now have less than six months to establish compliance with the first of the Cybersecurity Rule’s requirements. This means covered financial institutions will quickly need to: (1) assess the current state of their information security programs and what modifications may be required based on the specific policies and controls required by the Rule; and (2) consider the new processes that may need to be created to meet the Rule’s reporting, recordkeeping and certification requirements.