No Result
View All Result
SUBSCRIBE | NO FEES, NO PAYWALLS
MANAGE MY SUBSCRIPTION
NEWSLETTER
Corporate Compliance Insights
  • Home
  • About
    • About CCI
    • CCI Magazine
    • Writing for CCI
    • Career Connection
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Library
    • Download Whitepapers & Reports
    • Download eBooks
    • New: Living Your Best Compliance Life by Mary Shirley
    • New: Ethics and Compliance for Humans by Adam Balfour
    • 2021: Raise Your Game, Not Your Voice by Lentini-Walker & Tschida
    • CCI Press & Compliance Bookshelf
  • Podcasts
    • Great Women in Compliance
    • Unless: The Podcast (Hemma Lomax)
  • Research
  • Webinars
  • Events
  • Subscribe
Jump to a Section
  • At the Office
    • Ethics
    • HR Compliance
    • Leadership & Career
    • Well-Being at Work
  • Compliance & Risk
    • Compliance
    • FCPA
    • Fraud
    • Risk
  • Finserv & Audit
    • Financial Services
    • Internal Audit
  • Governance
    • ESG
    • Getting Governance Right
  • Infosec
    • Cybersecurity
    • Data Privacy
  • Opinion
    • Adam Balfour
    • Jim DeLoach
    • Mary Shirley
    • Yan Tougas
No Result
View All Result
Corporate Compliance Insights
Home Cybersecurity

Yahoo Settlement Reflects Important Role of Cybersecurity Whistleblowers

by Matthew LaGarde
May 22, 2018
in Cybersecurity, Data Privacy, Featured
Cybersecurity

Reflecting Pressure on Companies to Address Cybersecurity Deficiencies

Yahoo recently agreed to pay the Securities and Exchange Commission $35 million to resolve claims that the company misled investors by failing to disclose a massive cybersecurity breach.  Cybersecurity whistleblowers should feel empowered by this news, which follows other efforts by the SEC to crack down on nondisclosures like these, including through the publication of a new cybersecurity guidance document in February 2018. 

The U.S. Securities and Exchange Commission (SEC) has reached yet another settlement arising from a cybersecurity event. On April 24, 2018, the SEC announced that it had reached a $35 million settlement with Altaba, Inc. – the company formerly known as Yahoo! Inc. – to resolve claims that the company misled investors by failing to disclose the cybersecurity breach that enabled hackers to steal the personal data of hundreds of millions of Yahoo users.

The Yahoo Data Breach

According to the SEC, in December 2014, Yahoo’s information security team, including its chief information security officer (CISO), learned of a massive breach of the company’s user database resulting in the acquisition of more than 500 million user accounts. The information stolen in the breach included personal data that Yahoo’s information security team referred to as the company’s “crown jewels”: Yahoo usernames, email addresses, telephone numbers, dates of birth, hashed passwords, and security questions and answers.
Within days, the CISO notified members of Yahoo’s senior management and legal teams that malicious hackers had acquired hundreds of millions of Yahoo users’ personal data. But the individuals on those teams did not share this information with Yahoo’s auditors or outside counsel to enable them to assess the company’s disclosure obligations in its public filings. As a result, Yahoo’s risk factor disclosures in its annual and quarterly reports from 2014 through 2016 claimed the company only faced the risk of future data breaches, while failing to disclose that a massive data breach had already taken place.
Yahoo’s misleading disclosures continued into 2016 while in talks with Verizon Communications, Inc., about the potential sale of its operating business to Verizon. Yahoo affirmatively represented in a July 23, 2016, a stock purchase agreement that it had not experienced any significant data breaches. Yahoo did not disclose the breach until September 2016; the day after its disclosure, the company’s market capitalization decreased by nearly $1.3 billion. Yahoo later admitted in a Form 10-K filed on March 1, 2017, that the “relevant legal team had sufficient information to warrant substantial further inquiry in 2014, and they did not sufficiently pursue it.”

SEC Public Disclosure Requirements

SEC regulations require the filing of periodic public disclosures and dictate the specific content of those disclosures. Specifically, Item 503(c) of Regulation S-K, codified at 17 C.F.R. § 229.503(c), requires “a discussion of the most significant factors that make the offering speculative or risky.” The SEC has explained that Regulation S-K arose from Sections 7, 10, and 19(a) of the Securities Act, and Sections 3(b), 12, 13, 14, 15(d), and 23(a) of the Exchange Act. Guidance documents issued by the SEC in October 2011 and February 2018 make clear that the Commission “expect[s] companies to disclose cybersecurity risks and incidents that are material to investors, including the concomitant financial, legal, or reputational consequences.” The February 2018 Guidance continued, “Companies should avoid generic cybersecurity-related disclosure and provide specific information that is useful to investors.” According to the SEC, Yahoo’s failures to disclose material information violated the Securities Act and the Exchange Act and the related rules and regulations.

Good News for Cybersecurity Whistleblowers

The SEC’s February 2018 Cybersecurity Guidance, along with this settlement, are encouraging news for cybersecurity whistleblowers who are pressuring their companies to either address cybersecurity deficiencies or be more transparent about past or potential data breaches. As Alexis Ronickher explains in more detail in her Cybersecurity Whistleblower Protection Guide, because the securities laws require publicly traded companies to disclose material risks, a cybersecurity whistleblower’s concerns about her company’s failure to disclose such a risk could constitute protected activity under statutes like the Sarbanes-Oxley Act of 2002. Moreover, as this settlement demonstrates, they could also form the basis of a valuable whistleblower tip to the SEC.

Previous Post

Corporate America Takes Action As Awareness of Risk to Key Assets Grows

Next Post

Compliance in the Cloud: Best Practices for Building Trust

Matthew LaGarde

Matthew LaGarde

matthew-lagardeMatthew LaGarde is an associate with the whistleblower and employment law firm Katz, Marshall & Banks, LLP, in Washington, D.C., where he focuses his practice on civil rights and employment issues. He earned his law degree from the University of Maryland School of Law. Matthew can be reached at lagarde@kmblegal.com.

Related Posts

news roundup data grungy

DEI, Immigration Regulations Lead List of Employers’ Concerns

by Staff and Wire Reports
May 9, 2025

Half of fraud driven by AI; finserv firms cite tech risks in ’25

GFT Canada Update

GFT Expands AI Compliance Suite for Canadian Credit Unions

by Corporate Compliance Insights
May 8, 2025

Digital transformation company GFT has expanded its compliance suite to help Canadian credit unions combat payment scams and identity theft...

AxiomGRC Launch

Business Resilience Platform Axiom GRC Enters Global Market

by Corporate Compliance Insights
May 8, 2025

A business resilience platform called Axiom GRC has launched in the UK, backed by £500 million private equity investment from...

MyCOI Launch

myCOI Launches AI-Powered Insurance Compliance Platform

by Corporate Compliance Insights
May 8, 2025

Insuretech provider myCOI has launched illumend, an AI-powered platform designed to manage third-party insurance compliance and certificate of insurance processing....

Next Post
Data Privacy

Compliance in the Cloud: Best Practices for Building Trust

No Result
View All Result

Privacy Policy | AI Policy

Founded in 2010, CCI is the web’s premier global independent news source for compliance, ethics, risk and information security. 

Got a news tip? Get in touch. Want a weekly round-up in your inbox? Sign up for free. No subscription fees, no paywalls. 

Follow Us

Browse Topics:

  • CCI Press
  • Compliance
  • Compliance Podcasts
  • Cybersecurity
  • Data Privacy
  • eBooks Published by CCI
  • Ethics
  • FCPA
  • Featured
  • Financial Services
  • Fraud
  • Governance
  • GRC Vendor News
  • HR Compliance
  • Internal Audit
  • Leadership and Career
  • On Demand Webinars
  • Opinion
  • Research
  • Resource Library
  • Risk
  • Uncategorized
  • Videos
  • Webinars
  • Well-Being
  • Whitepapers

© 2025 Corporate Compliance Insights

Welcome to CCI. This site uses cookies. Please click OK to accept. Privacy Policy
Cookie settingsACCEPT
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT
No Result
View All Result
  • Home
  • About
    • About CCI
    • CCI Magazine
    • Writing for CCI
    • Career Connection
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Library
    • Download Whitepapers & Reports
    • Download eBooks
    • New: Living Your Best Compliance Life by Mary Shirley
    • New: Ethics and Compliance for Humans by Adam Balfour
    • 2021: Raise Your Game, Not Your Voice by Lentini-Walker & Tschida
    • CCI Press & Compliance Bookshelf
  • Podcasts
    • Great Women in Compliance
    • Unless: The Podcast (Hemma Lomax)
  • Research
  • Webinars
  • Events
  • Subscribe

© 2025 Corporate Compliance Insights