Harmonic Dissonance—Synching Up Cybersecurity Regulations

Harmonic Dissonance—Synching Up Cybersecurity Regulations

INSIGHTi

Harmonic Dissonance—Synching Up
Cybersecurity Regulations
July 31, 2023
On July 19, 2023, the Office of the National Cyber Director (ONCD) announced that it will start a process
to harmonize cybersecurity regulations and seek regulatory reciprocity. In this pursuit, the White House
released a Request for Information (RFI) seeking input from stakeholders on the regulations their
industries and entities face, challenges they encounter in meeting those regulations, and potential gaps
that exist.
This endeavor initiates an objective from the March 2023 National Cybersecurity Strategy and its
implementation plan.
Efforts surrounding regulatory harmonization have been lauded by some Members of Congress and
explored by congressional committees in the past. Yet, attempts to achieve regulatory alignment have
been fruitless. Even after the ONCD’s announcement, the Securities and Exchange Commission (SEC)
announced that it adopted a new rule requiring publicly traded companies to disclose cybersecurity
incidents to investors. This action front-runs similar disclosure rules that the Cybersecurity and
Infrastructure Security Agency (CISA) is required to issue per the Cyber Incident Reporting for Critical
Infrastructure Act of 2022 (CIRCIA), but are still in development.
This Insight discusses cybersecurity regulations, their harmonization, and options for Congress.
Cybersecurity Regulations
Prior to CIRCIA, the U.S. government did not have broadly applicable cybersecurity regulations. Instead,
Congress and agencies established rules for cybersecurity sectorally—that is, agencies regulated specific
sectors independently for specific purposes. Some, but not all, sectors are regulated for cybersecurity in
some way. Most common among these regulations is the requirement to report incidents. For example,
defense contractors, bulk electric system providers, financial depository institutions, health care facilities,
nuclear power licensees, and transportation facilities all have responsibilities to report to a federal agency
(or approved entity) when they experience cyber incidents. Some of these entities also have requirements
for planning cybersecurity response activities, implementing mitigation strategies, and assigning
responsibilities for cybersecurity to a facility’s officer.
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The SEC rule is unique in the breadth of its applicability—all publicly traded companies, regardless of
sector or other reporting requirements. The SEC’s view is that cybersecurity risk must be assessed and
disclosed to investors and that cyber incidents constitute material events. Previously, cybersecurity
incidents were not largely considered material events, with a handful of incidents meeting that threshold
(e.g., the Equifax Breach). The SEC’s rule creates repetitive reporting requirements with the pending
CIRCIA and existing sectoral rules.
In addition to federal regulation, private sector companies are also subject to numerous rules imposed by
state regulatory agencies. There is no obligation for regulatory agencies to coordinate or deconflict their
efforts, leading to some frustration within firms.
Individual entities may concurrently be subject to the CIRCIA rule, SEC rules, and sectoral rules. These
requirements may compel the same information to be repeatedly disclosed to different regulators. The
costs associated with regulatory compliance have been cited by some industry groups as burdensome.
Harmonizing Regulations
Recognizing the challenges in harmonizing regulations, the ONCD is pursuing a variety of options. The
RFI is open for public comment until mid-September 2023, and ONCD officials have suggested that
harmonization efforts will be a multi-year process. First, the ONCD plans to solicit feedback and develop
a framework for regulatory harmonization. Two framework options the ONCD is already considering are
the application of regulations in a tiered manner (e.g., aligning requirements to existing business size to
allow small and medium businesses flexibility) and pursing reciprocity among agencies for issued
regulations (rather than attempting to harmonize those regulations).
In its March 2020 report, the Cyberspace Solarium Commission acknowledged the tension between
burdensome regulations and the utility of regulations in improving cybersecurity outcomes. Ultimately,
the Commission did not make a recommendation regarding harmonization, partly because of the
challenges in doing so.
Councils for pursuing regulatory harmonization existed prior to and after the Commission’s review. In
both cases, noticeable progress towards harmonization have not been publicly observed or achieved.
• The Cybersecurity Forum for Independent and Executive Branch Regulators existed before the
Commission. According to its charter, the body, then chaired by the Nuclear Regulatory
Commission, sought to “increase the overall effectiveness and consistency of regulatory
authorities’ cybersecurity efforts.” It has since been revitalized under the leadership of the Federal
Communications Commission.
• The National Cybersecurity Strategy proposes using the CIRCIA-created Cyber Incident
Reporting Council (CIRC) to coordinate and advance common standards and deconflict the
variety of federal cyber incident reporting requirements. While this is a responsibility given to the
CIRC in its authorizing legislation, the law does not provide new regulatory authority, nor does it
extend to other cybersecurity regulations (e.g., minimum standards and planning requirements).
Considerations for Congress
After Congress determines that a regulation is needed, authority to regulate is usually granted in a three-
step framework. First, an authorized entity would create the regulation which industry must follow. This
is also called rulemaking. Next, an agency could examine or supervise for compliance with the regulation.
If a company is found to be not in compliance with the regulation, an agency could enforce the regulation
(e.g., suing the company or issuing a fine). Congress may grant authority to different agencies for each

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step in this framework. Critical to this framework is that regulation be independent of other agency
authorities and activities.
Regulatory independence has been a key tenet of rulemaking, but also contributes to challenges in
achieving harmonization. It is unclear what requirement or incentive that regulatory agencies have to
issue, alter, or remove regulations to align with another’s.
Congress may choose to monitor these harmonization efforts in an effort to oversee their success.
Congress may face a question of granting new and explicit authorities for issuing regulations or directing
an agency to change existing regulations. Congress may also choose to explicitly authorize an office,
agency, or council with the responsibility for ensuring that cybersecurity regulations are harmonized (or
reciprocal) and empowering that body with the authorities necessary to ensure that it can happen.
Congress can also choose to direct regulatory agencies to change their regulations to harmonize or
reciprocate with others.
In pursuing any of these options, current ONCD efforts to explore harmonization could inform future
congressional action.

Author Information

Chris Jaikaran

Specialist in Cybersecurity Policy

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