Navigating the New SEC Cybersecurity Rule with Concentric AI

November 16, 2023
Cyrus Tehrani
5 min read

The U.S. Securities and Exchange Commission (SEC) has recently introduced a groundbreaking rule [SEC Final Rule Release No. 33-11216, Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure]. The rule signals a significant shift in the cybersecurity landscape for public companies.

Effective as of July 26, 2023, the rule not only mandates enhanced cybersecurity measures but also sets new standards for incident response, communication, and transparency. The rule symbolizes an evolving understanding of cybersecurity’s critical role in protecting investor interests and maintaining market integrity.

The goal of the SEC rule — which is essentially a cybersecurity law — is to ensure all public companies disclose information as maturely and effectively as the most cyber-mature company.

Key Components of the SEC Cybersecurity Rule

For public companies and business leaders, the SEC’s rule is bound to add to the complexities of the cybersecurity landscape. The new requirements will inarguably impact business operations — especially concerning systems, processes, and controls. Senior business leaders may need to reevaluate their current strategies.

Here’s a rundown of the key issues surrounding the rule.

Enhanced transparency: Under the new rule, the SEC is prioritizing the need for clear, timely, and comprehensive disclosures. Companies must now inform stakeholders about their cybersecurity strategies and whether incidents occur. The goal is to set a level of transparency that’s crucial for maintaining investor trust and market stability.

Expanded definition of materiality: With the new rule, the concept of materiality has expanded beyond immediate financial impacts. Today, it includes considerations like long-term reputational damage, operational disruptions, and potential legal consequences. This broader view of materiality should encourage companies to reassess cybersecurity strategies much more holistically.

Proactive cybersecurity measures: The SEC is emphasizing the importance of proactive cybersecurity under the new rule. This means companies must do more than merely implement robust security measures; conducting regular assessments of potential vulnerabilities and threats is necessary to stay ahead with their cybersecurity efforts.

Board-level accountability: With the new rule, cybersecurity is more embedded into the boardroom, as it underscores the essential role of senior executives and board members in overseeing and prioritizing cybersecurity. This shift only increases the importance of integrating cybersecurity into corporate governance

Alignment with other regulations: The SEC’s new rule was designed to work alongside existing domestic and international regulatory frameworks, promoting a unified and consistent approach to cybersecurity across different jurisdictions.

A little more about materiality and the disclosure requirement

The subjective measure of materiality requires a multi-disciplinary approach to determine its impact on a company’s financial health and performance. The SEC allows companies to decide what constitutes a material incident, guided by established case law and legislation. The decision-making process must consider whether the information would significantly influence an investor’s decision or alter the public perception of the company.

Four-day disclosure requirement

The SEC rule requires organizations to report material cybersecurity incidents within a four-day window, which begins when the incident is considered material, not when it’s initially detected. This tight window will challenge organizations to quickly assemble and disclose relevant information, which can be difficult in complex enterprise environments. In some cases where national security or public safety is at risk, the SEC may allow a temporary delay in disclosure.

Concentric AI: Your partner in achieving compliance

The SEC rule may be all about disclosure, but without a clear view of their data risk, companies won’t have the necessary information they need in order to comply.

With Concentric AI, companies can:

  • Discover and identify their data
  • Monitor and classify their data for risk
  • Remediate data risk issues

Data Discovery and Identification

Concentric AI’s Semantic Intelligence solution uses sophisticated machine learning technologies to autonomously scan and categorize sensitive data —  from financial data to PII/PHI/PCI to intellectual property to business confidential information — wherever it is stored.

Our Risk Distance™ analysis autonomously identifies that data, learns how it’s used, and determines whether it’s at risk. With Concentric AI, organizations know where their sensitive data resides — across unstructured or structured data repositories, email/ messaging applications, cloud or on-premises — all with semantic context.

This capability is crucial for understanding the scope of data held by a company and being prepared for SEC’s new disclosure rules.

Risk Monitoring and Classification

For any organization, the ability to continuously monitor data for risk is not only challenging but time-consuming for IT and security teams. Adherence to data protection laws and cybersecurity disclosure regulations like the SEC’s new rule are becoming more crucial, but the resources required to write complex rules and deploy policies on-the-fly can be overwhelming.

With Concentric AI, you can autonomously discover how sensitive data is being used, who it is being shared with, and who accessed it — to quickly and accurately pinpoint risk from inappropriate permissioning, risky sharing, and unauthorized access.  This step is critical in ensuring that companies meet the SEC’s requirements for proactive risk management and timely incident reporting.

Effective Risk Remediation

Concentric AI’s Risk Distance™ analysis leverages deep learning to compare each data element with baseline security practices used by similar data to identify risk without rules and policies. More importantly, our solution can remediate these access risks as they happen – whether it’s fixing access control issues or permissions, disabling sensitive file sharing with a third party, or blocking an attachment on a messaging service.  The best part is that Concentric AI reduces risk and protects sensitive data without upfront policies and doesn’t require large teams to operationalize.

This feature is particularly important for maintaining the integrity of data and ensuring compliance with the SEC’s emphasis on robust cybersecurity measures

How Concentric AI helps key stakeholders

Boards and executives: Concentric AI provides tools for strategic oversight and risk assessment, aligning cybersecurity strategies with broader business goals and regulatory requirements. This alignment is crucial under the SEC’s new rule, which places significant responsibility on senior leadership for cybersecurity oversight.

Incident response teams: Our solution boosts incident response strategies with its real-time monitoring and alerting capabilities. This feature is vital for complying with the SEC’s stringent four-day incident disclosure requirement, ensuring that companies can respond quickly and effectively to any cybersecurity incidents.

The final word

With Concentric AI, navigating the complexities of the SEC’s cybersecurity requirements becomes more manageable and strategic, an especially critical endeavor with stakeholder interests and the company’s reputation at stake.

Customers are successfully using our product in production for petabytes of data for:

Book a demo today to see firsthand — with your own data — how Concentric AI’s solution can quickly and easily be deployed to manage data risk and maintain compliance in your organization.


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