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On June 15, 2021, the SEC announced the settlement of charges against a real estate settlement services company relating to “cybersecurity vulnerability that exposed sensitive customer information.”  However, the enforcement proceeding was not directed at the failure to protect the information.  Rather, it was based upon the company’s deficient disclosure controls and procedures. 

The basis for the proceeding was that, after learning of a vulnerability that could compromise the information, the company issued a press statement and filed an 8-K report, both of which failed to report that the vulnerability had been identified several months earlier but had not been remediated in accordance with company policy.  As a result, the SEC found that the company “failed to maintain disclosure controls and procedures designed to ensure that all available, relevant information…was analyzed for disclosure” in the company’s SEC filings, and the company agreed to a cease-and-desist order and to pay a $487,616 penalty.

This is at least the second time in several months that the SEC has used internal or disclosure controls to penalize a company for conduct having little or nothing to do with those controls (for example, see here). Public companies should keep these cases in mind when dealing with a wide variety of matters.

Please direct any questions or observations to Gunster securities law and corporate governance practice leader Bob Lamm.


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This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.

About Gunster

Gunster, Florida’s law firm for business, provides full-service legal counsel to leading organizations and individuals from its 11 offices statewide. Established in 1925, the firm has expanded, diversified and evolved, but always with a singular focus: Florida and its clients’ stake in it. A magnet for business-savvy attorneys who embrace collaboration for the greatest advantage of clients, Gunster’s growth has not been at the expense of personalized service but because of it. The firm serves clients from its offices in Boca Raton, Fort Lauderdale, Jacksonville, Miami, Orlando, Palm Beach, Stuart, Tallahassee, Tampa, Vero Beach, and its headquarters in West Palm Beach. With over 200 attorneys and 200 committed support staff, Gunster is ranked among the National Law Journal’s list of the 500 largest law firms and has been recognized as one of the Top 100 Diverse Law Firms by Law360. More information about its practice areas, offices and insider’s view newsletters is available at www.gunster.com.

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