Skip to content

Discerning Data

  • About Us
  • Additional Resources
  • Contact Us

DISCERNING DATA

A Faegre Drinker Blog Covering the Latest in Privacy, Cybersecurity and Data Strategy

  • Privacy
  • Cybersecurity
  • Data Strategy
  • Disruptionware

New York Department of Financial Services and National Securities Corporation Agree to $3 Million Settlement in Cybersecurity Enforcement Action

Share

Earlier this month, the New York State Department of Financial Services (NYDFS) announced a settlement and consent order with National Securities Corporation (National Securities) for $3 million in connection with National Securities’ violations of NYDFS’s Cybersecurity Regulation, 23 NYCRR Part 500 (Part 500).

National Securities sells life insurance, accident and health insurance, and variable life/variable annuities insurance. As part of its day-to-day operations, National Securities collects personal data from its customers.

According to the consent decree, National Securities suffered data breaches on October 23, 2019 and May 12, 2020. In both incidents, unauthorized parties gained access to the email accounts of National Securities’ employees and contractors. The unauthorized access was likely gained through phishing schemes and exposed a significant amount of customer data. Following the incidents, National Securities failed to fully implement multi-factor authentication (MFA) for its internal networks, which is a security requirement under Part 500.12(b).

Furthermore, NYDFS found that in 2018, National Securities violated Part 500.17(b), which requires covered entities to annually certify their compliance with Part 500. Despite filing a certification of compliance for 2018, NYDFS concluded that National Securities falsely certified compliance with Part 500 due to the fact that a MFA was not fully implemented.

The consent decree also highlights National Securities’ failure to properly report two other cybersecurity events as required by Part 500.17(a). In the first incident, which occurred on April 3, 2018, National Securities determined that customer information had been potentially exposed through a phishing scheme. Although the event was reported to the Attorney General’s Offices for New York, New Jersey, Connecticut, Massachusetts, as well as the affected customers, it failed to report the incident to NYDFS, as required by Part 500.

The second unreported incident occurred on March 6, 2019 when an unauthorized actor gained access to National Securities’ document management system. The company notified potentially impacted customers, along with the IRS, SEC, FBI, and local County Sheriff’s Office, but did not report the breach to NYDFS.

This latest cybersecurity enforcement action by NYDFS highlights the importance of compliance with Part 500. In particular, companies should ensure that they have the proper authentications in place for employees, including MFA, which serves as an important tool against phishing emails. Likewise, covered entities must make sure that their cybersecurity policies satisfy Part 500 before filing a certificate of compliance with NYDFS. Lastly, companies should ensure that they notify NYDFS of cybersecurity incidents when they are required to do so under Part 500.

The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.

About the Author: Peter Baldwin

Peter Baldwin draws on his experience as a former federal prosecutor to counsel clients facing government investigations and cybersecurity issues. View Peter's full bio on the Faegre Drinker website.

Receive Email Alerts to New Articles

SUBSCRIBE

April 27, 2021
Written by: Peter Baldwin
Category: Cybersecurity
Tags: cybersecurity, data breach, MFA, NYDFS, phishing

Post navigation

Previous Previous post: Faegre Drinker on Law and Technology Podcast: ‘Merging’ Mergers, Acquisitions and Cybersecurity
Next Next post: New York Department of Financial Services Issues Report on SolarWinds Cyberattack

Search the Blog

Sign Up for Email Alerts

PODCASTS

Faegre Drinker on Law and Technology

©2023 Faegre Drinker Biddle & Reath LLP. All Rights Reserved. Lawyer Advertising.

  • About Us
  • Additional Resources
  • Contact Us
We use cookies to improve your experience with our website. By browsing our site, you are agreeing to the use of cookies. For more information about how we use cookies, please review our privacy policy and cookie policy. OK
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT