Wall Street Authority Prepares To Adopt New Rules Regarding Hacking Incident Reports

Wall Street plans to adopt new rules (photo: Doc. itimewa)

JAKARTA - On Wednesday, July 26, the top regulator Wall Street plans to adopt a new rule that will require companies listed on the stock exchange to report hacking incidents. This step was taken to help investors tackle rising costs and frequencies of cyberattacks.

The US Securities and Exchange Commission (SEC), which consists of five members, will also issue proposals governing potential conflicts of interest in the use of artificial intelligence (AI) by brokers, this reform is partly influenced by the "meme stock" rally event in 2021 when officials find the use of robo-advisers and AI brokers with game features to encourage trade.

If adopted, cybersecurity rules will require companies to report hacking incidents within four days of determining that the incident is serious enough to be considered relevant information for investors. This rule allows delays if the Justice Department considers it necessary to protect national security or in police investigations, in accordance with the SEC.

Companies are also required to periodically explain what efforts they are making to identify and manage threats in cyberspace. This rule, first proposed in March 2022, is part of a broader effort by the SEC to strengthen the financial system against data theft, system failure, and cyber intrusion.

Prior to the vote, SEC officials stated that in response to public comments, they had cut parts of the proposal, including removing the requirement to disclose the expertise of board members in cybersecurity and limiting the definition of information to be disclosed.

The AI proposal, if issued by commissions, will require brokers to "eliminate or neutralize" any conflicts of interest that occur if the predictive data analysis of trading platforms places broker financial interests ahead of the company's clients' interests.

SEC chairman Gary Gensler has introduced AI rules in recent weeks, noting that AI use also poses a danger to financial stability. According to regulatory agendas, the SEC also plans to issue a similar proposal regulating the use of AI by investment advisors.

In the third vote scheduled for Wednesday, the SEC will decide whether to propose a rule change that grants exceptions to some online investment advisors from registration under the 1940 Investment Advisory Act.