The Securities and Exchange Commission (SEC) announced its most significant case ever filed against a respondent for one of the world’s largest data breaches. Albata, Inc., f/d/b/a Yahoo! Inc., (“Yahoo”) settled with the SEC to charges of violating Section 17(a)(2) and 17 (a)(3) of the Securities Act of 1933 (“Securities Act”), amongst other charges, and agreed to various remedies, including a $35 million penalty.

In summary, the SEC alleged that in December of 2014 Yahoo’s information security team learned that Russian hackers stole what was referred to internally as the company’s “crown jewels”: usernames, email addresses, phone numbers, birthdates, encrypted passwords, and security questions and answers for more than 500 million users. Although information relating to the breach was reported to members of Yahoo’s senior management and legal department, Yahoo failed to properly investigate the circumstances of the breach and to adequately consider whether the breach needed to be disclosed to investors. In addition, the SEC found that Yahoo did not share information regarding the breach with its auditors or outside counsel in order to assess the company’s disclosure obligations in its public filings.

To learn more about the SEC’s order and some takeaways, please read the full blog post on Drinker Biddle’s SECurities Law Perspectives blog , which I co-authored with colleague Mary P. Hansen.