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SEC vs. Canada: Cybersecurity Rules Overview

Cybersecurity | Feb 28, 2024

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Comparing U.S. SEC and Canadian Cybersecurity Regulations for Businesses

The introduction of new SEC cybersecurity rules in 2023 has further highlightetd the importance of board involvement in cybersecurity oversight. Skadden, Arps, Slate, Meagher & Flom LLP wrote an informative article on emerging expectations for public companies in the U.S. Below we compare at a high level the new SEC rules with the Canadian regulatory landscape including implications for startups and scaleups.

United States

  • The SEC mandates that public companies report material cybersecurity incidents within four business days of determining their materiality.  Prompt disclosure fullstop.

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  • Companies are required to disclose their processes for identifying, assessing, and managing cybersecurity risks in their annual reports, including the board's oversight role.
  • There's a strong emphasis on the board's active engagement in cybersecurity oversight, with specific requirements for documenting the board's oversight of cybersecurity risks.

Canada

  • The Canadian Securities Administrators (CSA) issued guidelines in December 2023 rather than strict rules for cybersecurity disclosures. These guidelines encourage companies to disclose material cybersecurity risks and incidents but do not specify a strict timeline for disclosure like the SEC's four-business-day requirement.
  • Canadian regulations tend to emphasize a risk-based approach, urging companies to consider the likelihood and magnitude of harm from cybersecurity incidents when determining materiality for disclosure purposes.
  • Canada has robust privacy laws, such as the Personal Information Protection and Electronic Documents Act (PIPEDA), which require businesses to protect personal information and report breaches of security safeguards that pose a real risk of significant harm to individuals. This complements cybersecurity disclosure by focusing on the protection of personal data.

See:  Blakes: Cybersecurity Trends in Canada: A 2023 Perspective

  • Canada has implemented a national cybersecurity strategy that includes initiatives to improve the cybersecurity posture of businesses, including small and medium-sized enterprises. This strategy supports a broader approach to cybersecurity resilience across the economy.

Key Differences and Similarities

  • One of the main differences is the mandatory nature of the SEC's disclosure requirements versus the more voluntary, guideline-based approach taken by Canadian regulators.
  • The SEC provides a specific timeline for reporting material cybersecurity incidents, which is not explicitly matched by Canadian guidelines.
  • Both countries emphasize the importance of protecting personal information, but Canada's approach is underpinned by specific privacy legislation that requires breach notification based on the risk of harm.

Implications for Startups and Scale-Ups

For startups and scale-ups in Canada, understanding both the Canadian and U.S. regulatory environments is critical, especially for those operating or planning to operate in cross-border contexts. While Canada's approach may offer more flexibility, the trend in both countries reflects a growing emphasis on transparency, accountability, and proactive risk management in cybersecurity.

See:  Cavelo Inc. Raises CAD$5M to Advance Cybersecurity Solutions

Canadian companies, especially those considering going public or expanding into the U.S. market, should be mindful of these regulatory differences and prepare accordingly. Adopting best practices from both regulatory frameworks can enhance a company's cybersecurity posture and its attractiveness to investors and partners in an increasingly digital and interconnected business environment.


NCFA Jan 2018 resize - SEC vs. Canada: Cybersecurity Rules OverviewThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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