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[ISN] Feds Mull IT Disclosure


By Caron Carlson
April 14, 2003 

Momentum is building in Washington to require all public companies to
annually report the performance of their IT security initiatives, not
just the financial services and health care industries that face
scrutiny now.

The Bush administration considered requiring companies to report on
network security during the crafting of the National Strategy to
Secure Cyberspace. But the idea was unpopular in many enterprises and
did not make the final plan, released in February.

Last week, former presidential adviser for cyberspace Richard Clarke,
who spearheaded the strategy, urged Congress to act quickly to
legislate such obligations.

Enterprises object to the suggestion of broad reporting requirements,
but some see a certified audit process reflected in annual Securities
and Exchange Commission filings as beneficial.

"I think IT will begin taking on the same relative importance that
finance and accounting has within a company," said Michael Schwedhelm,
senior vice president and CIO of Union Labor Bank, in Oakland, Calif.  
"What I see happening is something along the lines of CPAs for network

The financial services and health care industries, which are already
subject to network security disclosures, would face the least added
burden. Possible requirements include disclosing measures taken to
secure systems, identifying IT security auditors and detailing

U.S. Rep. Adam Putnam, R-Fla., who chairs the House Government Reform
subcommittee on technology and information policy, told eWeek last
week that legislative action to improve the nation's IT infrastructure
is needed this year.

A bill has not yet been drafted, Putnam said, but members of the
subcommittee are considering several recommendations by IT experts,
including performance audits that would be reported in SEC filings.

Whether companies should disclose specific security breaches remains a
subject of wide debate even among proponents of new reporting
requirements. Some states have begun taking action on their own. In
California, a law set to take effect in July will require companies to
report network breaches if sensitive customer data may have been

If incident reporting is to be required, a nationwide policy would be
preferable to diverse state-by-state requirements, said Schwedhelm,
who is also an eWeek Corporate Partner.

"While [the California requirement] may be achievable by companies
that only do business in California, it will be a nightmare if each
individual state has its own set of criteria," he said.

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