If you don’t have a good understanding of an insured’s cybersecurity standards, activities and compliance programs, you can’t effectively assess the risk. If you don’t have a good understanding of an insured’s cybersecurity standards, activities and compliance programs, you can’t effectively assess the risk. (Shutterstock)

The Securities and Exchange Commission (SEC) announced its first enforcement action under the cybersecurity guidance it released earlier in the year. Under a settlement agreement, a firm agreed to pay a $1 million penalty for failing to operate with appropriate cybersecurity controls in place.

In a case in which the SEC (or other regulator) finds that an organization’s cybersecurity is not what it should be, there is a very real risk that an individual lawsuit against the company’s management and board of directors could follow, from shareholders, those with compromised information, or both.

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