The US Securities and Exchange Commission (SEC) is set to adopt new rules that would require publicly traded companies to disclose hacking incidents. The move is aimed at helping the investing public deal with the increasing cost and frequency of cyber attacks.
Under the proposed cybersecurity rule, companies would be required to disclose any cyber breaches within four days after determining that they are material to investors. The rule allows for delays if they are deemed necessary to protect national security or ongoing police investigations.
Additionally, companies would need to provide updates on their efforts to identify and manage cyber threats. This rule is part of the SEC’s broader initiative to strengthen the financial system against data theft, system failures, and cyber intrusions.
In response to public input, the SEC has made adjustments to the proposal. They have removed the requirement for companies to disclose board members’ expertise in cybersecurity and have narrowed down the definition of what information must be disclosed.
In a separate proposal, the SEC is also planning to regulate potential conflicts of interest in broker-dealers’ use of artificial intelligence (AI). This reform was partly influenced by the events of the 2021 “meme stock” rally, where robo-advisers and brokers used AI and game-like features to drive trading. The proposal would require broker-dealers to address any conflicts of interest that arise from a trading platform’s predictive data analytics.
SEC Chair Gary Gensler has emphasized the need for such regulations, citing the potential dangers AI poses to financial stability. The SEC is also considering issuing a similar proposal for the use of AI by investment advisers.
In addition, the SEC will be deciding whether to propose changes to rules that exempt certain online investment advisers from registering under the Investment Advisers Act of 1940.
These new rules aim to enhance transparency and protect investors in the face of growing cybersecurity threats.
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