The NYDFS Cybersecurity Regulation (23 NYCRR 500) mandates stringent cybersecurity requirements for financial services companies under the jurisdiction of the New York State Department of Financial Services (NYDFS). This regulation aims to protect nonpublic information and financial systems from increasing cyber threats by establishing a strong cybersecurity framework for risk management, incident response, and data protection.
23 NYCRR 500 applies to all entities regulated by NYDFS, including banks, insurance companies, mortgage brokers, and other financial services providers. Entities must evaluate their cybersecurity risks, design security programs appropriate to their risk profile, and comply with the regulation to ensure robust protection for sensitive data and systems.
The regulation outlines specific cybersecurity controls and requirements across a broad range of areas:
500.01: Definitions - Provides definitions of key terms and clarifies applicability of the regulation.
500.02: Cybersecurity Program - Requires covered entities to implement a cybersecurity program designed to protect information systems and sensitive data.
500.03: Cybersecurity Policy - Entities must develop a cybersecurity policy addressing topics such as data governance, network security, incident response, and third-party security.
500.04: Chief Information Security Officer (CISO) - Mandates the appointment of a CISO to oversee and implement the cybersecurity program, with regular reporting to the board or senior management.
500.05: Penetration Testing and Vulnerability Assessments - Requires annual penetration testing and bi-annual vulnerability assessments to identify and mitigate vulnerabilities in information systems.
500.06: Audit Trail - Establishes requirements for maintaining audit logs of cybersecurity events and financial transactions for detection and investigation of incidents.
500.07: Access Privileges - Ensures that only authorized users have access to sensitive data and systems, following the principle of least privilege.
500.08: Application Security - Requires development and implementation of security procedures for in-house applications, including regular testing and evaluation.
500.09: Risk Assessment - Covered entities must conduct periodic risk assessments to evaluate cybersecurity risks and update programs accordingly.
500.10: Cybersecurity Personnel and Intelligence - Outlines the requirement for qualified cybersecurity personnel and leveraging threat intelligence to stay informed on emerging threats.
500.11: Third-Party Service Provider Security Policy - Requires cybersecurity policies for third-party providers to mitigate supply chain risks.
500.12: Multi-Factor Authentication - Mandates the use of multi-factor authentication for access to internal networks and sensitive systems.
500.13: Limitations on Data Retention - Specifies policies for data retention and secure disposal to reduce the risk of exposure.
500.14: Training and Monitoring - Requires regular cybersecurity awareness training for employees and monitoring of their cybersecurity practices.
500.15: Encryption of Nonpublic Information - Calls for encryption of sensitive data both in transit and at rest.
500.16: Incident Response Plan - Entities must develop an incident response plan for managing cybersecurity incidents effectively.
500.17: Notices to Superintendent - Obligates entities to notify the Superintendent of certain cybersecurity events within 72 hours.
500.18: Confidentiality - Emphasizes confidentiality for information submitted to NYDFS.
500.19: Exemptions - Lists specific exemptions based on company size, operational structure, or risk profile.
500.20: Enforcement - Outlines enforcement measures and potential penalties for non-compliance.
500.21: Effective Date - States the date when the regulation took effect and required compliance timelines.
500.22: Transitional Periods - Provides transitional periods to give entities additional time to comply with the regulation.
To ensure compliance, organizations must document cybersecurity policies, conduct risk assessments, train personnel, and submit periodic compliance certifications to the NYDFS. Non-compliance can lead to penalties, enforcement actions, and reputational damage.
This section defines key terms used throughout the regulation, including "Cybersecurity Event," "Information System," "Nonpublic Information," and "Covered Entity." These definitions establish a foundational understanding of the requirements and to whom they apply.
Understanding these terms helps ensure that covered entities can accurately interpret and apply each section of the NYDFS requirements to maintain compliance.
Each covered entity must establish and maintain a comprehensive cybersecurity program tailored to its specific risks. This program should ensure the confidentiality, integrity, and availability of information systems.
Risk Identification: Identify and assess internal and external cybersecurity risks.
Defense Infrastructure: Implement robust infrastructure to protect data and systems.
Incident Response: Ensure timely detection, response, and recovery from cybersecurity incidents.
Develop and document a cybersecurity program, perform regular risk assessments, and ensure continuous monitoring of information systems.
Each covered entity must implement a written cybersecurity policy approved by senior leadership. The policy must be aligned with the organization’s risk assessment and include guidelines on data security, access control, incident response, and more.
Scope: The policy should cover data protection, incident response, and network security.
Approval and Review: Ensure that the policy is regularly reviewed and approved by senior management.
Draft a detailed cybersecurity policy, conduct regular policy reviews, and ensure policy adherence across all departments.
Covered entities are required to designate a qualified individual, such as a Chief Information Security Officer (CISO), to oversee the cybersecurity program and policy implementation. This individual is responsible for reporting cybersecurity posture to the board or senior management.
Program Oversight: Supervise and implement the cybersecurity program and policies.
Risk Assessment: Ensure regular risk assessments are performed.
Board Reporting: Report on the state of cybersecurity directly to the board or senior officers at least annually.
Appoint a CISO, define the reporting structure, and outline clear responsibilities. Ensure that the CISO has direct access to the board and can communicate cybersecurity risks effectively.
Covered entities must conduct periodic penetration testing and vulnerability assessments to evaluate the security posture of their information systems and identify potential weaknesses.
Penetration Testing: Perform annual penetration testing to assess vulnerabilities.
Vulnerability Assessments: Conduct bi-annual vulnerability assessments of internal systems.
Schedule regular penetration testing, utilize third-party security assessment services if necessary, and review the findings to mitigate any identified vulnerabilities.
To detect and respond to cybersecurity events, covered entities must establish an audit trail system to maintain data that allows for the reconstruction of material financial transactions and log security-related activities.
Data Preservation: Retain audit records for a minimum of five years.
Activity Logs: Record security events and ensure system integrity and confidentiality.
Implement a log management solution, monitor audit logs regularly, and establish alert mechanisms for suspicious activities.
Covered entities must restrict user access privileges to only those necessary for employees to perform their job functions and implement regular reviews of access privileges.
Principle of Least Privilege: Ensure users have only the minimum access necessary.
Access Reviews: Conduct periodic access reviews to identify and revoke unnecessary access rights.
Configure role-based access controls (RBAC), automate access reviews, and remove access for terminated or inactive users immediately.
This section mandates that covered entities implement security measures for in-house developed applications and review third-party applications for vulnerabilities.
Secure Development: Establish secure coding practices for in-house applications.
Third-Party Applications: Ensure third-party software undergoes security assessment and meets organization standards.
Adopt a secure development lifecycle (SDLC), incorporate code review processes, and require vendors to submit security assessments of their applications.
Covered entities must perform periodic risk assessments to identify cybersecurity risks and evaluate their impact on information systems and business operations.
Risk Identification: Identify and document cybersecurity risks relevant to the organization.
Periodic Review: Regularly review and update the risk assessment based on changes in threats, technology, and business operations.
Conduct risk assessments regularly, document identified risks, and implement risk mitigation strategies based on assessment findings.
Covered entities must utilize qualified cybersecurity personnel to manage the cybersecurity program and keep informed of emerging threats to adapt security measures as needed.
Skilled Personnel: Employ staff with appropriate cybersecurity knowledge and skills.
Threat Intelligence: Monitor threat intelligence sources to stay informed on new and evolving risks.
Invest in cybersecurity training, subscribe to threat intelligence feeds, and allocate resources to support the cybersecurity team.
Entities must implement written policies and procedures to ensure that third-party service providers meet cybersecurity requirements to protect information systems and sensitive data.
Third-Party Security Policies: Establish guidelines for engaging with service providers.
Security Controls: Require third-party providers to implement adequate security controls and agree to regular security audits.
Develop third-party risk management policies, review providers’ cybersecurity capabilities, and include cybersecurity clauses in vendor contracts.
Multi-factor authentication (MFA) must be used for accessing sensitive data and systems to protect against unauthorized access.
Authentication Controls: Implement MFA for any individual accessing internal networks containing nonpublic information.
Remote Access: Require MFA for remote access to information systems.
Deploy MFA across systems handling sensitive data, configure access policies, and ensure that all staff are trained on MFA procedures.
Covered entities must have policies and procedures in place for securely disposing of nonpublic information no longer necessary for business operations or legal reasons.
Establish a data retention policy that specifies the duration of data retention, reasons for keeping the data, and the method for its secure disposal when no longer needed.
Identify categories of nonpublic information for disposal, automate deletion processes where possible, and ensure compliance with regulatory requirements on data retention.
Organizations must provide regular cybersecurity awareness training to employees and monitor their cybersecurity practices to identify any potential weaknesses or training needs.
Train all employees on cybersecurity awareness, especially those with access to sensitive data, and implement ongoing monitoring to ensure policy adherence.
Develop a training program, document training sessions, and perform regular audits of employee cybersecurity practices to assess and improve effectiveness.
Entities must implement encryption for nonpublic information both in transit and at rest to prevent unauthorized access.
Use strong encryption protocols to secure nonpublic information and, if encryption is not feasible, implement compensating controls approved by the CISO.
Encrypt sensitive data in databases, applications, and backups, and ensure that encryption keys are securely managed and rotated periodically.
Covered entities must establish and maintain a written incident response plan to effectively respond to and recover from cybersecurity events.
Develop a response plan outlining roles, responsibilities, response processes, and notification requirements to address cybersecurity incidents effectively.
Create an incident response team, establish response protocols, conduct regular tests of the incident response plan, and document incidents and responses.
Entities are required to notify the Superintendent of any cybersecurity event that has a material impact on the organization or involves unauthorized access to nonpublic information.
Report cybersecurity events that significantly affect business operations or involve nonpublic information within 72 hours of the event's discovery.
Establish a protocol for incident reporting, determine what constitutes a material cybersecurity event, and designate responsible personnel for notifying the Superintendent.
Maintaining the confidentiality of all submitted information is crucial. Covered entities and service providers must protect confidential and sensitive data from unauthorized disclosure.
Implement confidentiality policies to secure sensitive data and ensure that all information submitted to the Department is treated with strict confidentiality.
Establish confidentiality agreements with service providers, educate employees on handling sensitive information, and implement access controls.
Certain entities may qualify for exemptions from specific requirements under Part 500 based on size, operational structure, or risk profile.
Identify qualifying factors for exemption, such as small business size, limited operations, or a low risk profile, and submit exemption applications as needed.
Determine exemption eligibility, consult with legal counsel if necessary, and ensure compliance with any applicable sections even if exempt from others.
The NYDFS enforces Part 500 regulations, ensuring that entities meet cybersecurity requirements and imposing penalties for non-compliance.
Compliance with all applicable cybersecurity requirements is mandatory, and failure to comply may result in fines or enforcement actions.
Regularly assess compliance, keep documentation of all security measures, and implement remediation processes for any identified compliance gaps.
These regulations became effective on March 1, 2017, and covered entities were required to comply with specific timelines for each requirement.
Organizations were given phased timelines for compliance to allow sufficient time to implement controls as outlined by NYDFS.
Document compliance dates for each requirement, review regulatory updates, and ensure new employees are informed of all effective dates and requirements.
Transitional periods were provided for certain requirements to give covered entities additional time to implement required cybersecurity measures.
Compliance with transitional periods for specific requirements allowed organizations to align their processes with NYDFS regulations incrementally.
Identify any transitional period allowances that apply to your organization, monitor deadlines, and establish a plan for meeting each transitional compliance date.