Equifax and SEC Hacks

A lot in the news of late about the hacks at Equifax and the SEC.

“SEC Discloses Edgar Corporate Filing System Was Hacked in 2016,” The Wall Street Journal, September 21, 2017 A1.

“Equifax Hackers Spied for Months,” The Wall Street Journal, September 21, 2017 A1.

“Equifax Board Weighs Clawbacks,” The Wall Street Journal, September 30, 2017 B3.  How many years’ compensation will be affected?

“Equifax Lawyer in Hot Seat,” The Wall Street Journal, October 2, 2017 A1.  Chief legal officer probed for clearing stock sales after executives knew, but no one else did, about the hack.

“Equifax Ex-CEO Lays Out Lapses,” The Wall Street Journal, October 3, 2017 B1.  Staffers blamed for not reacting to public warning.

“Lawmakers Slam the Ex-CEO Of Equifax,” The Wall Street Journal, October 4, 2017 B1.  He and others “weren’t aware of the significance of the company’s data breach ….” “[A]n employee failed to notify other staff to patch the software ….”  For want of a nail ….

“Senators Rap Credit-Reporting Model,” The Wall Street Journal, October 5, 2017 B1.  “[W]hy consumers shouldn’t have power over the data [credit companies] collect on them”?

“Lawmaker Asks SEC To Delay Trade Log,” The Wall Street Journal, October 5, 2017 B12.  Head of House Financial Services Committee pressures SEC to delay release of trading database following hack of SEC systems. Can you have too much information?

“Equifax Timeline Criticized,” The Wall Street Journal, October 6, 2017 B10.  How long did Equifax sit on news of the hack before alerting the Board, the market and the Feds?  Is five weeks too long?  Executives selling stock in that window will be investigated.  Three weeks before he informed the Board.

“After Breach, SSN Reliance Is Criticized,” The Wall Street Journal, October 7, 2017 A4.  One reaction to the Equifax hack is a move to find a replacement for Social Security Numbers.

“Index Firm Flagged Equifax for Security,” The Wall Street Journal, October 7, 2017 B9.  Company warned about Equifax data security flaws in August 2016.

“Equifax Probes Possible New Breach,” The Wall Street Journal, October 13, 2017 B1.  A code installed on Equifax’s website by a vendor “serve[s] ‘malicious content’ to consumers.”  Just when you thought ti was safe to go back in the water again.

“GOP Bill Would Boost Checks on Credit Firms,” The Wall Street Journal, October 13, 2017 B10.  The horse having left the barn, the government wants to exercise more oversight.

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Another hack

“New York Investigates Deloitte Cyberbreach,” The Wall Street Journal, October 13, 2017 B10.  New York AG investigates breach, which “compromised information on a small number of clients.”  The breach started a year ago and wasn’t detected until April 2017.  The information compromised may have been limited to access credentials and the like, rather than account information.  Sort of like Equifax.

Who else has been attacked and (a) knows about it but is still keeping it quiet, or (b) doesn’t know about it yet?

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A top goal?

“CEOs Make Protecting Data a Top Goal,” The Wall Street Journal, October 13, 2017 B4.  Unfortunately, the focus is on cyber-security rather than the broader information risk profile.  While this affect CEOs’ email habits, as they are phishing targets?

While this is a start, do CEOs really understand how much their company’s proprietary information is worth?  Or their duty to protect the company’s assets (people, physical equipment, cash, and information)?  Why not?

And where are the boards?  Don’t they have an overarching duty to oversee the major risks the company is facing and to make sure there’s an effective program in place to address?

I hear the violin.  Is Rome burning?

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More military hacks

“Australia Hack Nets Data on U.S. Arms,” The Wall Street Journal, October 13, 2017 A6.  Hacker hacks a defense contractor’s computers and carried off “commercially sensitive data on sophisticated U.S. weapons systems.”  The ease of the hack is mind-boggling.

Is there a common scheme here?  Or otherwise solve this equation for X.

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Conflicts

“Lawmaker Is Focus Of Ethics Report,” The Wall Street Journal, October 12, 2017 A3.  A congressman is accused of misusing his public office and sharing non-public information about a company’s drug trials with other investors.

Here, the three threads (governance, information, and compliance) all come together.  A member of the governance structure allegedly violates the law and discloses non-public information that was likely material to some but not all investors.  How will the Yates memo apply here?

Can you hang high-ranking executives higher than the run-of-the-mill cheater?

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A failure of controls

What does it say about a company’s culture that allows a sexual predator to continue to run the company for years?  What other non-compliance with ethics and law will we find?  Not only there, but at every other company in the industry?  Nobody reported this?  Where were the policies and the audits?  Where were the lawyers?  Where was the press?

“Weinstein Co. Board Fires Harvey Weinstein, Citing Sexual Misconduct Allegations.”  The Wall Street Journal on-line, October 8, 2017.

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Disclosure

“A Hot Startup Misled Advertisers,” The Wall Street Journal, October 13, 2017 A1.  Outcome Health apparently misled advertisers as to how many units their ads were appearing on.  The investigation continues.

How would your employees react if ask to provide inflated numbers to potential customers?  How would your investors react after a story appears on page one, above the fold?  Probably reflects in the valuation of the company.  And what about your company’s extensive political contacts?

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