On November 1, 2023, the New York Department of Financial Services (NYDFS) published the finalized Second Amendment to its Cybersecurity Regulation (23 NYCRR Part 500), which includes a number of significant and, for many covered entities, onerous changes to its original regulation. The finalized Second Amendment is much like the June 2023 proposed draft (which made certain revisions to the November 2022 draft). Covered entities should take note of these now-final changes that will require covered entities to review and revamp major components of their cybersecurity programs, policies, procedures, and controls to ensure they are in compliance. This is particularly important as the NYDFS continues to take on an active enforcement role following cyber events, marking itself as a leading cyber regulator in the United States.
Covered entities must notify the NYDFS of certain cybersecurity incidents, including providing notice within: (1) 72 hours after determining a cybersecurity event resulting in the “deployment of ransomware within a material part of the covered entity’s information system” occurred; and (2) 24 hours of making an extortion payment in connection with a cybersecurity event.
Covered entities must implement additional cybersecurity controls, including expanding their use of multifactor authentication and maintaining a comprehensive asset inventory. Covered entities are also required to maintain additional (or more prescriptive) cybersecurity policies and procedures, including ensuring that their incident response plans address specific delineated issues (outlined in the Second Amendment) and maintaining business continuity and disaster recovery plan requirements (both of which must be tested annually).
The most senior levels of the covered entity (senior governing body) must have sufficient knowledge to oversee the cybersecurity program. Additionally, the highest-ranking executive and the CISO are required to sign the covered entity’s annual certification of material compliance.
A material failure (which could be a single act) to comply with any portion of the Cybersecurity Regulation for a 24-hour period is considered a violation.
The Second Amendment became effective on November 1, 2023, and covered entities generally have 180 days to come into compliance with the new requirements. There are certain requirements, however, that will be phased in over the next two years. We have outlined the material changes and the effective dates below.
The NYDFS is providing a number of resources for covered entities, including a helpful visual overview of the implementation timeline for covered entities, Class A companies, and small businesses (NYDFS-licensed individual producers, mortgage loan originators, and other businesses that qualify for exemptions under Sections 500.19 (a), (c), and (d)). The NYDFS is also hosting a series of webinars to provide an overview of the Second Amendment; individuals can register for the webinars on the NYDFS’s website.