United States: New York Stiffens Data Protection Regs

New York has once again positioned itself as a leader among states by recently implementing one of the most detailed and stringent data security regulations to date. It should come as no surprise that New York is a prime target for those looking to steal financial information. The Big Apple is one of the, if not the, center of the world's financial community, and a massive volume of financial data is stored and processed there.

To bolster the security of this information, the New York Department of Financial Services has created and implemented a new set of regulations designed to force certain regulated businesses to employ necessary policies, procedures and technologies to protect consumer and corporate financial information. While not necessarily controversial, the requirements of this statute could be confusing and potentially onerous to those unfamiliar with cybersecurity best practices.

What is the new cybersecurity regulation?

The new regulation is entitled "Cybersecurity Requirements for Financial Services Companies" and can be found at 23 NYCRR § 500 et seq. 

Who is covered by the new regulations?

The Cybersecurity Regulation applies to all "covered entities," which includes all individuals and non-governmental entities (i.e., corporations, partnerships, associations, etc.) "operating under or required to operate under a license, registration, charter, certificate, permit, accreditation or similar authorization under the Banking Law, the Insurance Law or the Financial Services Law." Thus, essentially any company or other entity that is not a government agency doing business in the insurance and financial services industry in New York is covered by this new regulation. This regulation casts a very broad net, as many organizations that are not traditional banks or insurance companies are still required to obtain certificates, permits or other authorizations under the applicable laws and will be required to comply with the regulations. 

What does the cybersecurity regulation cover?

The Cybersecurity Regulation imposes new requirements on those covered by the regulation, designed to impose new policies, procedures and technical protections to prevent and limit unauthorized access to protected data. Among these requirements are the following:

  • Cybersecurity Program -- Covered entities must create, document and implement an internal cybersecurity policy. This policy must be based on a risk assessment (described below), and implements "defensive infrastructure and ... policies and procedures" to protect the financial data the entity possesses.
  • Cybersecurity Policy -- The Cybersecurity Program described above is documented in the form of a comprehensive Cybersecurity Policy. This policy must be approved by company leadership and address the following:
  • Information security
  • Data governance and classification
  • Asset inventory and device management
  • Access controls and identity management
  • Business continuity and disaster recovery
  • System operations and availability measures
  • System and network security
  • Systems and network monitoring
  • Systems and application development and quality assurance
  • Physical records security
  • Vendor and third party service provider management
  • Risk assessment
  • Incident response
  • Chief Information Security Officer -- Each entity must appoint a Chief Information Security Officer ("CISO"), whose role it is to lead the company's Cybersecurity Program and oversee the creation and implementation of the Cybersecurity Policy.
  • Penetration Testing and Vulnerability Assessment - The entity's program must include annual penetration testing of vital systems and bi-annual system scans to assess the system and network requirements for known vulnerabilities.
  • Risk Assessment -- The Cybersecurity Regulation includes a requirement that each entity perform a risk assessment based on written policies and procedures created and documented within the Cybersecurity Policy. This risk assessment is performed on the entity's computer and network systems and forms the backbone of the Cybersecurity Program. The risk assessment is designed to highlight the major risks to the entity's financial data, customer data, and other sensitive data and assist the entity in understanding how data flows through its systems and where it is most vulnerable. The Risk Assessment should be periodically revisited and updated as necessary.
  • Third-Party Service Provider Security Policy --  The Cybersecurity Regulation specifically identifies the risks posed by the use of third parties in handling financial or customer data. Whenever data is moved between systems, risks and vulnerabilities are often exposed and can be exploited. Entities are expected to incorporate third parties into the Risk Assessment described above, as well as perform the necessary due diligence to ensure that third party service providers provide sufficient security to the data they are handling.
  • Multi-factor Authentication -- Now, under the Cybersecurity Regulation, all covered entities must utilize multi-factor authentication technologies for all remote-access services, unless the entity's CISO has approved the use of reasonably equivalent remote access controls.
  • Encryption -- The Cybersecurity Regulation also requires that nonpublic information is encrypted while in motion and while at rest unless this encryption is infeasible. If such a determination is made, it must be documented and revisited by the CISO at least annually. The kind and strength of the encryption is not provided by the Cybersecurity Regulation.
  • Incident Response Plan -- All covered entities must create and implement an incident response plan ("IRP"). An IRP is a documented, practices and tested policy that outlines the steps that are taken by all relevant employees in the event of a suspected or actual data breach.

Recognizing that not all companies are built alike, the regulations permit the covered entity to use an affiliate or "qualified" third-party service provider to assist in complying with the regulation. This alleviates the burden on smaller organizations that may not have the infrastructure or resources to implement all requirements with in-house personnel.

The Cybersecurity Regulation went into effect March 1, 2017, and represents a first in the nation approach to targeting a specific industry. New York has already signaled that it aims to be aggressive and vigilant in its enforcement of the regulations and there is little reason to think otherwise. Which means covered entities who have not already complied should do so as quickly as possible. 

The requirements, long considered best practices in the cybersecurity world, will be new and potentially confusing to many companies. At Thompson Coburn, we have a team of attorneys with experience implementing corporate programs like New York's Cybersecurity Program, including the creation and implementation of IRPs.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.