Benzinga | Jun 16, 2021 11:05AM EDT

SEC Fines First American Financial $487K For 'Deficient Disclosure Controls' Over Data Breach

First American Financial Corporation (NYSE:FAF) has agreed to a $487,616 settlement with the U.S. Securities and Exchange Commission that resolves charges related to a data breach that exposed confidential customer information.

What Happened: The SEC alleged that First American Financial received notification in May 2019 from a cybersecurity journalist about a vulnerability with its application for sharing document images.

The company was informed that this vulnerability resulted in the exposure of more than 800 million images going back to 2003, including the Social Security numbers and financial information of its customers.

First American Financial, a real estate settlement services company, issued a press statement related to the data breach and filed a Form 8-K with the SEC.

The regulator charged the company with not informing its senior executives responsible for those public statements that the company's information security personnel identified the same vulnerability several months earlier but failed to remediate the problem.

As a result, the SEC stated First American Financial failed to maintain disclosure controls and procedures designed to ensure that the information regarding the vulnerability was analyzed for disclosure in its reports filed with the regulator, a violation Rule 13a-15(a) of the Exchange Act.

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How It Was Resolved: With the settlement, First American Financial agreed to a cease-and-desist order and to pay the agreed-upon penalty. The Santa Ana, California-based company was not required to either admit or deny the SEC's findings, nor did it issue any public statement on the settlement.

Kristina Littman, chief of the SEC Enforcement Division's Cyber Unit, faulted First American's "deficient disclosure controls" and used the case as a warning to other financial services companies.

"Issuers must ensure that information important to investors is reported up the corporate ladder to those responsible for disclosures," she said.

(Illustration by Methodshop/Pixabay)