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Financial firms are now required by the US government to report data breaches within a 30-day timeframe.

The US government has mandated that financial institutions in the country must disclose any security breaches within a 30-day timeframe from the date of discovery. This new requirement stems from revisions to Regulation S-P by the US Securities and Exchange Commission (SEC), aimed at safeguarding consumers’ personal financial information held by financial entities.

Under these changes, entities such as broker-dealers, investment companies, registered investment advisers, and transfer agents are obligated to inform affected individuals as soon as possible, but no later than 30 days after discovering the breach.

Key Details of the Incident

SEC Chair Gary Gensler highlighted the evolving landscape of data breaches over the years, emphasizing the importance of updating Regulation S-P to enhance customer data privacy. He stressed the necessity for covered firms to promptly notify individuals in the event of a breach, promoting transparency and investor protection.

When notifying affected parties, financial institutions must provide a comprehensive account of the breach, specifying the data compromised and offering guidance on protective measures for the victims. Additionally, these entities are required to establish and maintain protocols for detecting, responding to, and recovering from unauthorized access to customer information.

While the regulatory update is seen as a positive step, concerns have been raised regarding loopholes that allow institutions to forgo notifying individuals if they believe the breach does not pose significant harm or inconvenience. Critics argue that this provision could potentially undermine the intended purpose of the regulation.

Officially known as “Privacy of Consumer Financial Information,” the updated regulation aligns with the privacy provisions outlined in the Gramm-Leach-Bliley Act. It aims to ensure that financial institutions prioritize the protection of sensitive customer data and provide transparency regarding their privacy policies and practices.

These amendments are set to become effective 60 days after publication in the Federal Register, with larger organizations given an 18-month compliance period following the modifications’ release. Smaller entities will have 24 months to adhere to the revised regulatory requirements.

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