Speaker 1: Well, now it's time for our daily Bloomberg Law Brief,
Speaker 1: exploring legal issues in the news. And today Bloomberg Law
Speaker 1: hos doing grosso at Michael Best discussed the hack of
Speaker 1: the SEC's EDGAR document filing system, which granted hackers access
Speaker 1: too closely guarded secrets from American companies. They speak with
Speaker 1: Robert Hawckett, a professor at Cornell University Law School, and
Speaker 1: Peter Henning, a professor Edwayne State University Law School. Peter,
Speaker 1: the you know, most of the EDGAR system is publicly
Speaker 1: available information. That's kind of the point, but there is
Speaker 1: part of it that has some confidential information that apparently
Speaker 1: is the subject of this hack. Explain exactly what it
Speaker 1: is that got hacked into here. Well, the security breach
Speaker 1: came through a portal that the SEC has so that
Speaker 1: companies that recently went public could essentially take it for
Speaker 1: a test drive and past materials on EDGAR. The requirement
Speaker 1: is that whenever a company makes its disclosure quarterly or
Speaker 1: annual earnings, that has to do that um immediately and
Speaker 1: make it available to all investors at the same time.
Speaker 1: So it was a way for them to test it UM.
Speaker 1: But there are companies that will make filings. Uh. For example,
Speaker 1: I p O s Now you can make what's essentially
Speaker 1: a dark filing. You can put information in there that
Speaker 1: isn't available to the public, that might have been available
Speaker 1: to the hackers and would give them maybe some insight
Speaker 1: information about what was going to happen at those companies
Speaker 1: and perhaps others if they rummaged around through the system.
Speaker 1: You just don't know what you're going to find. Bob,
Speaker 1: the attack occurred last year. The SEC just disclosed it
Speaker 1: on Wednesday. Is that against its own advice to companies
Speaker 1: to announce cyber attacks promptly. Well, it's it's it's hard
Speaker 1: to tell the type attrition. I mean, the problem is, um,
Speaker 1: you know that the SEC is sort of forced start
Speaker 1: faced with a dilemma. On the one hand, if it
Speaker 1: reveals information that turns out not to be really that
Speaker 1: important in the long gre term but sort of stokes
Speaker 1: a panic or stokes sort of excess concern in the
Speaker 1: short term, Uh, than it might well, you know, sort
Speaker 1: of think better about having disclosed something too quickly. So
Speaker 1: it's not sure whether to tell anybody right away because
Speaker 1: it doesn't want to cause more panic than might be warranted.
Speaker 1: On the other hand, that being said, if it does
Speaker 1: indeed turn out to be a significant problem, but then
Speaker 1: of course the SEC looks to have egg on its
Speaker 1: face when it turns out that it knew the information
Speaker 1: even sooner. In this particular case, I think what's particularly
Speaker 1: important or maybe worth noting, is that it didn't reveal
Speaker 1: the information until it determines that somebody might actually have
Speaker 1: used some still gotten information in order to engage in
Speaker 1: some form of insider trading. And that's something the SEC
Speaker 1: apparently only just learned. And as Robert Hockett, a professor
Speaker 1: at Cornell University Law School, and Peter Henning, a professor
Speaker 1: at Wayne State University Law School, speaking with Bloomberg Law
Speaker 1: host June Grasso and Michael Best, you can listen to
Speaker 1: Bloomberg Law weekdays at one pm Wall Street Time here
Speaker 1: on Bloomberg Radio and now among the top legals to
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