The company formerly known as Yahoo has agreed to pay a $35 million penalty to settle charges of misleading investors about its massive data breach, the Securities and Exchange Commission announced this week.
Yahoo, which was recently acquired by Verizon and now called Altaba, was charged by the SEC with failing to inform investors about the breach by Russian hackers that resulted in the theft of usernames, email addresses, phone numbers, birth dates, encrypted passwords, and security questions for hundreds of millions of Yahoo user accounts. Yahoo finally disclosed the breach publicly in 2016.
“We do not second-guess good faith exercises of judgment about cyber-incident disclosure. But we have also cautioned that a company’s response to such an event could be so lacking that an enforcement action would be warranted. This is clearly such a case,” said Steven Peikin, co-director of the SEC Enforcement Division.
According to the SEC, Yahoo for two years didn’t disclose the breach or its impact on the business or legally when it filed its quarterly and annual reports after the breach. Yahoo also didn’t consult with its auditors or outside counsel about its public disclosure requirements. “Finally, the SEC’s order finds that Yahoo failed to maintain disclosure controls and procedures designed to ensure that reports from Yahoo’s information security team concerning cyber breaches, or the risk of such breaches, were properly and timely assessed for potential disclosure,” the SEC said.
Read more about the SEC order here.
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