Cyberattacks

By Cydney Posner

Some of the large investment and commercial banks have begun to disclose in their 10-Ks the risk that they are susceptible to cyberattacks, according to an article in Law 360. The disclosures report that they have been affected in the past and continue to be vulnerable to disruption of their websites through "denial of service" attacks that overwhelm their networks with computer traffic, and indicate generally the steps  they are taking to mitigate these risks.

Some well known high-tech companies have included similar disclosures. While the article suggests that many companies largely  ignored the SEC's 2011 guidance on disclosure of cybersecurity risks, the increasing frequency and prominence of  cyberthreats and cyberattacks has caused more companies to focus on the presence of these risks and include more disclosure about them. The article identifies three factors that spurred companies to take the guidance more seriously: first, the SEC sent letters to a number of companies in August pushing them to provide voluntary disclosure; second, in September, former Sen. Jay Rockefeller sent letters to Fortune 500 companies to induce them explain how they were protecting information; and third, in February, President Obama issued a cybersecurity executive order. Commentators note, however, that companies should take care not to provide so much detail "that it provides a roadmap for those seeking to infiltrate the company's network."

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