The first state cybersecurity regulation will take effect, in New York, on March 1.

The final regulation requires insurance companies, banks, and other financial services institutions regulated by the New York State Department of Financial Services (“DFS”) to establish and maintain a cybersecurity program designed to protect consumers' private data and ensure the safety and soundness of New York's financial services industry.

“New York is the financial capital of the world, and it is critical that we do everything in our power to protect consumers and our financial system from the ever increasing threat of cyber-attacks,” Governor Andrew M. Cuomo said in a statement. ”These strong, first-in-the-nation protections will help ensure this industry has the necessary safeguards in place in order to protect themselves and the New Yorkers they serve from the serious economic harm caused by these devastating cyber-crimes.”

The superintendent of the DFS, Maria T. Vullo, added, “With this landmark regulation, DFS is ensuring that New York consumers can trust that their financial institutions have protocols in place to protect the security and privacy of their sensitive personal information. As our global financial network becomes even more interconnected and entities around the world increasingly suffer information breaches, New York is leading the charge to combat the ever-increasing risk of cyber-attacks.”

The final risk-based regulation includes certain regulatory minimum standards while encouraging firms to keep pace with technological advances. The new regulation provides for:

- Controls relating to the governance framework for a robust cybersecurity program including requirements for a program that is adequately funded and staffed, overseen by qualified management, and reported on periodically to the most senior governing body of the organization;

- Risk-based minimum standards for technology systems including access controls, data protection including encryption, and penetration testing;

- Required minimum standards to help address any cyber breaches including an incident response plan, preservation of data to respond to such breaches, and notice to DFS of material events; and

- Accountability by requiring identification and documentation of material deficiencies, remediation plans and annual certifications of regulatory compliance to DFS.

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