Wall Street lawyer and newly-confirmed Securities and Exchange Commission Chair Jay Clayton stands to be a central figure in the nation’s awakening to cyber threats. Before his appointment, Clayton helped lead Sullivan & Cromwell’s General Practice Group, where he was known for brokering mergers and acquisitions. Although his views on issues of data security are less well known, Clayton co-authored an article in 2015 on the need to acknowledge “how little we understand” about cybersecurity.1 At his March confirmation hearing before the Senate Banking Committee, he offered a glimpse into his current thinking. In response to questions about potential legislation,2 Clayton wondered aloud whether today’s ordinary investor fully appreciates the cyber risks that he believes face all major companies. And when Sen. Mark Warner (D-Va.) pressed him on public companies’ failures to disclose significant data breaches in SEC filings, Clayton did not blink. “As I look across the landscape of discussion and understanding of cyber threats and their possible impact on companies,” he stated, “I question whether the disclosure is where it should be.”
This acknowledgement of cyber risks and the need for consistent disclosures creates an evolving landscape for publicly traded companies. While the United States lacks a principal cybersecurity regulator, the SEC has implemented regulations in its purview and has begun to penalize companies that fail to comply. As Clayton begins his tenure at the SEC, here are a few areas to keep an eye on in the months ahead, in terms of legislation, regulatory guidance and enforcement activity.
Cybersecurity Disclosure Legislation
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