Feds Mull IT Disclosure

Congress considers wider reporting of security plans.

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 security."

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 breaches.

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 nations 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 accessed.

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.