The biggest privacy challenges affecting businesses today are regulatory scrutiny from government agencies, media coverage with unintended consequences, and privacy risks that are discovered during corporate transactions.

Rapidly growing eCommerce and technology companies typically focus on creating viable products and services, adapting business models and responding to challenges, and using data in new ways to glean valuable insights and advantages. They often achieve success by disrupting existing industry norms and flouting convention in an attempt to do things better, faster and more cost-effectively. In the tech world, this strategy is often a blueprint for success.  At the same time, this strategy also often raises privacy concerns from regulators and investors.  In fact, three of the biggest privacy challenges affecting businesses today are regulatory scrutiny from government agencies (and potentially, personal liability arising from such scrutiny), media coverage with unintended consequences, and privacy risks that are discovered during corporate transactions.

Regulatory Scrutiny Of Privacy Practices

Government regulators, led by the Federal Trade Commission (“FTC”), have taken an activist role in enforcing privacy protections.  The FTC often does so by utilizing its powers under the FTC Act, which enables the FTC to investigate and prosecute companies and individuals for “unfair or deceptive acts and practices.” Some of the activities which the FTC considers to fall under the “unfair or deceptive” umbrella are: a company’s failure to enforce privacy promises; violations of consumers’ privacy rights; and failing to maintain reasonably adequate security for sensitive consumer information.

Though most of the FTC’s investigations are settled privately and non-publicly, those that do become public (usually, as a result of a company refusing to cooperate voluntarily or disagreeing with the FTC on the proper resolution) are often instructive. For example, the FTC recently settled charges against Snapchat, the developer of a popular mobile messaging app.  The FTC accused Snapchat of deceiving consumers with promises about the disappearing nature of messages sent through the service, the amount of personal data Snapchat collected, and the security measures taken to protect that data from misuse and unauthorized disclosure.  Similarly, when Facebook acquired WhatsApp, another cross-platform mobile messaging app, the FTC explicitly warned both Facebook and WhatsApp that WhatsApp had made clear privacy promises to consumers, and that WhatsApp would be obligated to continue its current privacy practices ― even if such policies differ from those of Facebook ― or face FTC charges. The takeaway from the FTC’s recent investigations and enforcement actions are clear: (1) businesses should be very careful about the privacy representations that they make to consumers; (2) businesses should comply with the representations they make; and (3) businesses should take adequate measures to ensure the privacy and security of the personal information and other sensitive data that they obtain from consumers.

Sometimes officers and directors of businesses are named in a FTC action along with, or apart from, the company itself.  In such cases, the interests of the individuals and those of the companies often diverge as the various parties try to apportion blame internally.  In certain cases, companies and their officers are held jointly and severally liable for violations.  For example, the FTC sued Innovative Marketing Inc. and three of its owners/officers. A federal court found the business and the owners/officers to be jointly and severally liable for unfair and deceptive actions, and entered a verdict for $163 million against them all. The evolving world of regulatory enforcement actions reveals that traditional liability protections (i.e., acting through a corporate entity) do not necessarily shield owners, officers, and/or directors from personal liability when privacy violations are at issue. Officers and directors should keep in mind that knowledge of, or indifference to, an unfair or deceptive practice can put them squarely in the FTC’s crosshairs ― and that the “ostrich defense” of ignoring and avoiding such issues is unlikely to produce positive results.

Unintended Consequences of Publicity

Most businesses crave publicity as a means of building credibility and awareness for their products or services. However, businesses should keep in mind that being in the spotlight can also put the company on regulators’ radar screens, potentially resulting in additional scrutiny where none previously existed. One of our clients, for example, came out with an innovative service that allows consumers to utilize their personal information in unique ways, and received significant positive publicity as a result. Unfortunately, that publicity also caught the interest of a regulatory entity. It turns out that some of our client’s statements about their service were misunderstood by the government. Ultimately, we were able to clarify the service offered by our client for the government in an efficient and cost-effective manner, demonstrating that no wrongdoing had occurred, and the inquiry was resolved to our client’s (and the government’s) satisfaction.  Nonetheless, the process itself resulted in substantial aggravation for our client, who was forced to focus on an investigation rather than on its business activities. Ultimately, the misunderstanding could have been avoided if the client had checked with us first, before speaking with reporters, to ensure the client’s talking points were appropriate.

Another more public example occurred at Uber’s launch party in Chicago.   Uber, the car service company which allows users to hail a cab using a mobile app, allegedly demonstrated a “God View” function for its guests which allowed the partygoers (including several journalists) to see, among other information, the name and real-time location of some of its customers (including some well-known individuals) in New York City – information which those customers did not know was being projected onto a large screen at a private party. The resulting publicity backlash was overwhelming. Senator Al Franken wrote Uber a letter demanding an explanation of Uber’s data collection practices and policies and Uber was forced to retain a major law firm to independently audit its privacy practices, and implement changes to its policies, including limiting the availability and use of the “God View.”

Experience has shown us that contrary to the old mantra, all publicity is not necessarily good publicity when it comes to the world of privacy.  Before moving forward with publicity or marketing for your business, consider incorporating a legal review into the planning to avoid any potentially adverse impact of such publicity.

Privacy Concerns Arising During A Corporate Transaction

Perhaps most importantly to company owners, the failure to proactively address privacy issues in connection with corporate transactions can cause significant repercussions, potentially destroying an entire deal.  Most major corporate transactions involve some degree of due diligence.  That due diligence, if properly performed by knowledgeable attorneys and businesspeople, will uncover any existing privacy risks (i.e., violations of privacy-related laws, insufficient privacy security measures or compliance issues which become financially overwhelming).  If these issues were not already factored into the financial terms of the transaction or affirmatively addressed from the outset, the entire landscape of the transaction can change overnight once the issues are uncovered – with the worst case scenario being the collapse of the entire deal.  Therefore, it is critical that businesses contemplating a corporate transaction be prepared to address all relevant privacy issues upfront.  Such preparation should include an internal analysis of the business from a privacy-law perspective (i.e., determining which regulatory schemes apply, and whether the business is currently in compliance) and being prepared to provide quick responses to relevant inquiries, such historical policies and procedures related to privacy and data security, diagrams of network/data flow, lists of third-parties with whom data has been shared, representations and warranties made to data subjects, and descriptions of complaints, investigations, and litigation pertaining to privacy issues.

Privacy and data security issues can be particularly tricky depending on the nature of the data that is maintained by the company and the representations that the company has made with respect to such data.  Businesses are well-advised to prepare a due diligence checklist in preparation for any corporate transaction which should include an assessment of the business’ compliance with applicable information privacy and data security laws as well as any potential liabilities from deficiencies that are discovered.  Addressing these issues in a proactive manner will allow the business to be more prepared for the corporate transaction and mitigate any harm which otherwise might flow from any problems which arise.

The Federal Trade Commission has proposed revisions that will bring the Children’s Online Privacy Protection Act in line with 21st century technology, largely targeting social networks and online advertisers.

By Alice Cheng

Based on comments solicited last year, the Federal Trade Commission (FTC) has posted proposed revisions to the Children’s Online Privacy Protection Act (COPPA). The Act, which has not been updated since its inception in 1998, may be extended to include social networks and online advertisers.

According to the current regulations, COPPA applies only to website operators who know or have reason to know that users are under the age of 13, requiring the sites to obtain parental consent before any collection of data. In the past decade, an increased ability to harvest consumer information has necessitated revisions. In a FTC staff report conducted earlier this year, the Commission addressed a growing need for app stores and app developers to provide more information regarding their data collection practices to parents. With the proposed changes posted today, the FTC plans to update COPPA to respond to modern concerns surrounding social networking sites, advertising networks, and applications. Under the proposed changes, such third parties may be held responsible for unlawful data collection practices when they know or have reason to know that they are connecting to children’s websites. Mixed audience websites may have to screen all visitors in order for COPPA regulations to apply to users under 13 years of age. Additionally, restrictions on advertising based on children’s online activity may be tightened.

 The FTC will be accepting public comment to the proposed rules via the FTC website. Comments will be accepted until September 10, 2012.

Several House lawmakers have sent letters to nine major data broker firms, seeking transparency on data practices.

By Alice Cheng

Last week, eight House members, including Congressional Bi-Partisan Privacy Caucus chairmen Ed Markey (D-Mass.) and Joe Barton (R-Tex.), sent letters to nine major data broker firms, asking for information on how they collect, assemble, maintain, and sell consumer information to third parties.

The letter references a recent New York Times article profiling data broker Acxiom, which may have spurred the lawmakers’ decision to target the firms. Data brokers are large firms that aggregate information about hundreds of millions of consumers, selling them to third parties for marketing, advertising, and other purposes.  Oftentimes, profiles of consumers are created to reflect spending habits, political affiliation, and other behavioral information. As the article explains, the issue with these activities is that they are largely unregulated, largely unknown to the general public, and are often be difficult to opt out of.

Privacy advocates, lawmakers, and often the Federal Trade Commission have made continued moves towards increased transparency of the activities of data brokers. A statement explains that, in sending the letter to the nine firms, the lawmakers in the Bi-Partisan Privacy Caucus seek to obtain information on the brokers relating to  “privacy, transparency and consumer notification, including as they relate to children and teens.”

Survey finds that only 61.3% of apps have privacy policies, reflecting perceived need for increased app privacy regulations.

By Alice Cheng

A recent survey conducted by the Future of Privacy Forum (FPF) examined whether popular free and paid mobile apps provided users with access to a privacy policy visit this website. The survey found that 61.3% of the 150 apps examined had a privacy policy, while more free apps than paid apps had privacy policies. While the numbers of apps with privacy policies are still low, these findings mark an overall increase from the previous year.

The FPF credits the consumer privacy efforts of various groups, including the Federal Trade Commission and the California Attorney General. The FTC has made continuous efforts to develop companies develop best consumer privacy practices, and has been involved in battling privacy violations. In February, California Attorney General Kamala Harris persuaded six major companies with mobile platforms (including Apple, Microsoft, and Google) to ensure that app developers include privacy policies that comply with the California Online Privacy Protection Act. More recently, Harris also announced the formation of the Privacy Enforcement and Protection Unit to oversee privacy issues and to ensure that companies are in compliance with the state’s privacy laws.

Together with the FPF survey results, these recent strides reflect a growing nationwide concern for information privacy. However, mere access to privacy policies does not ensure that consumers are aware of what happens to information collected about them. Many policies are long and onerous, and can be confusing for consumers. As many privacy laws focus on protecting the consumer’s privacy interests, providing a clear privacy policy is oftentimes a best practice for all companies.

Check Cloud Contracts for Provisions Related to Privacy, Data Security and Regulatory Concerns

Check Cloud Contracts for Provisions Related to Privacy, Data Security and Regulatory Concerns“Cloud” Technology Offers Flexibility, Reduced Costs, Ease of Access to Information, But Presents Security, Privacy and Regulatory Concerns

With the recent introduction of Google Drive, cloud computing services are garnering increased attention from entities looking to more efficiently store data. Specifically, using the “cloud” is attractive due to its reduced cost, ease of use, mobility and flexibility, each of which can offer tremendous competitive benefits to businesses. Cloud computing refers to the practice of storing data on remote servers, as opposed to on local computers, and is used for everything from personal webmail to hosted solutions where all of a company’s files and other resources are stored remotely. As convenient as cloud computing is, it is important to remember that these benefits may come with significant legal risk, given the privacy and data protection issues inherent in the use of cloud computing. Accordingly, it is important to check your cloud computing contracts carefully to ensure that your legal exposure is minimized in the event of a data breach or other security incident.

Cloud computing allows companies convenient, remote access to their networks, servers and other technology resources, regardless of location, thereby creating “virtual offices” which allow employees remote access to their files and data which is identical in scope the access which they have in the office. The cloud offers companies flexibility and scalability, enabling them to pool and allocate information technology resources as needed, by using the minimum amount of physical IT resources necessary to service demand. These hosted solutions enable users to easily add or remove additional storage or processing capacity as needed to accommodate fluctuating business needs. By utilizing only the resources necessary at any given point, cloud computing can provide significant cost savings, which makes the model especially attractive to small and medium-sized businesses. However, the rush to use cloud computing services due to its various efficiencies often comes at the expense of data privacy and security concerns.

The laws that govern cloud computing are (perhaps somewhat counterintuitively) geographically based on the physical location of the cloud provider’s servers, rather than the location of the company whose information is being stored. American state and federal laws concerning data privacy and security tend to vary while servers in Europe are subject to more comprehensive (and often more stringent) privacy laws. However, this may change, as the Federal Trade Commission (FTC) has been investigating the privacy and security implications of cloud computing as well.

In addition to location-based considerations, companies expose themselves to potentially significant liability depending on the types of information stored in the cloud. Federal, state and international laws all govern the storage, use and protection of certain types of personally identifiable information and protected health information. For example, the Massachusetts Data Security Regulations require all entities that own or license personal information of Massachusetts residents to ensure appropriate physical, administrative and technical safeguards for their personal information (regardless of where the companies are physically located), with fines of up to $5,000 per incident of non-compliance. That means that the companies are directly responsible for the actions of their cloud computing service provider. OlenderFeldman LLP notes that some information is inappropriate for storage in the cloud without proper precautions. “We strongly recommend against storing any type of personally identifiable information, such as birth dates or social security numbers in the cloud. Similarly, sensitive information such as financial records, medical records and confidential legal files should not be stored in the cloud where possible,” he says, “unless it is encrypted or otherwise protected.” In fact, even a data breach related to non-sensitive information can have serious adverse effects on a company’s bottom line and, perhaps more distressing, its public perception.

Additionally, the information your company stores in the cloud will also be affected by the rules set forth in the privacy policies and terms of service of your cloud provider. Although these terms may seem like legal boilerplate, they may very well form a binding contract which you are presumed to have read and consented to. Accordingly, it is extremely important to have a grasp of what is permitted and required by your cloud provider’s privacy policies and terms of service. For example, the privacy policies and terms of service will dictate whether your cloud service provider is a data processing agent, which will only process data on your behalf or a data controller, which has the right to use the data for its own purposes as well. Notwithstanding the terms of your agreement, if the service is being provided for free, you can safely presume that the cloud provider is a data controller who will analyze and process the data for its own benefit, such as to serve you ads.

Regardless, when sharing data with cloud service providers (or any other third party service providers)), it is important to obligate third parties to process data in accordance with applicable law, as well as your company’s specific instructions — especially when the information is personally identifiable or sensitive in nature. This is particularly important because in addition to the loss of goodwill, most data privacy and security laws hold companies, rather than service providers, responsible for compliance with those laws. That means that your company needs to ensure the data’s security, regardless of whether it’s in a third party’s (the cloud providers) control. It is important for a company to agree with the cloud provider as to the appropriate level of security for the data being hosted. Christian Jensen, a litigation attorney at OlenderFeldman LLP, recommends contractually binding third parties to comply with applicable data protection laws, especially where the law places the ultimate liability on you. “Determine what security measures your vendor employs to protect data,” suggests Jensen. “Ensure that access to data is properly restricted to the appropriate users.” Jensen notes that since data protection laws generally do not specify the levels of commercial liability, it is important to ensure that your contract with your service providers allocates risk via indemnification clauses, limitation of liabilities and warranties. Businesses should reserve the right to audit the cloud service provider’s data security and information privacy compliance measures as well in order to verify that the third party providers are adhering to its stated privacy policies and terms of service. Such audits can be carried out by an independent third party auditor, where necessary.

Today, the Federal Trade Commission (FTC) issued a final report setting forth best practices for businesses to protect the privacy of American consumers and give them greater control over the collection and use of their personal data, entitled “Protecting Consumer Privacy in an Era of Rapid Change: Recommendations for Businesses and Policymakers.” The FTC also issued a brief new video explaining the FTC’s positions.  Here are the key take-aways from the final report:

  • Privacy by Design. Companies should incorporate privacy protections in developing their products, and in their everyday business practices. These include reasonable security for consumer data, limited collection and retention of such data, and reasonable procedures to ensure that such data is accurate;
  • Simplified Choice. Companies should give consumers the option to decide what information is shared about them, and with whom. Companies should also give consumers that choice at a time and in a context that matters to people, although choice need not be provided for certain “commonly accepted practices” that the consumer would expect.
  • Do Not Track. Companies should include a Do-Not-Track mechanism that would provide a simple, easy way for consumers to control the tracking of their online activities.
  • Increased Transparency. Companies should disclose details about their collection and use of consumers’ information, and provide consumers access to the data collected about them.
  • Small Businesses Exempt. The above restrictions do not apply to companies who collect only non-sensitive data from fewer than 5,000 consumers a year, provided they don’t share the data with third parties.

Interestingly, the FTC’s focus on consumer unfairness, rather than consumer deception, was something that FTC Commissioner Julie Brill hinted to me when we discussed overreaching privacy policies and terms of service at Fordham University’s Big Data, Big Issues symposium earlier this month.

If businesses want to minimize the chances of finding themselves the subject of an FTC investigation, they should be prepared to follow these best practices. If you have any questions about what the FTC’s guidelines mean for your business, please feel free to contact us.

OlenderFeldman gave a presentation on Wednesday at the SES New York 2012 conference about emerging legal issues in search engine optimization (SEO) and online behavioral advertising. The topic of his presentation, Legal Considerations for Search & Social in Regulated Industries, focused on search and social media strategies in regulated industries. Regulated industries, which include healthcare, banking, finance, pharmaceuticals and publicly traded companies, among others, are subject to various government regulations, he said, but often lack sufficient guidance regarding acceptable practices in social media, search and targeted advertising.

Messing began with a discussion of common methods that search engine optimization companies use to raise their client’s sites in the rankings. The top search spots are extremely competitive, and the difference between being on the first or second page can make a huge difference in a company’s bottom line. One of the ways that search engines determine the relevancy of a web page is through link analysis. Search engines examine which websites link to that page, and what the text of those links — the anchor text – says about the page, as well as the surrounding content, to determine relevance. In essence, these links and contents can be considered a form of online citations.

A typical method used by SEO companies to raise website rankings is to generate content, using paid affiliates, freelance bloggers, or other webpages under the SEO company’s control, in order to increase the website’s ranking on search engines. However, since this content is mostly for the search engine spiders, and not for human consumption, the content is rarely screened, which can lead to issues with government agencies, especially in the regulated industries. This content also rarely contains disclosures that the author was paid to create the content, which could be unfair and deceiving to consumers. SEO companies dislike disclosing paid links and content because search engines penalize paid links. Messing said, “SEO companies are caught between the search engines, who severely penalize disclosure [of paid links], and the FTC, which severely penalizes nondisclosure.”

The main enforcement agency is the Federal Trade Commission, which has the power to investigate and prevent unfair and deceptive trade practices across most industries, though other regulated industries have additional enforcement bodies. The FTC rules require full disclosure when there is a “material connection” between a merchant and someone promoting its product, such as a cash payment, or a gift item. Suspicious “reviews” or unsubstantiated content can raise attention, especially in regulated industries. “If a FTC lawyer sees one of these red flags, you could attract some very unwanted attention from the government,” Messing noted.

Recently, the FTC has increased its focus on paid links, content and reviews. While the FTC requires mandatory disclosures, it doesn’t specify how those disclosures should be made. This can lead to confusion as to what the FTC considers adequate disclosure, and Messing said he expects the FTC to issue guidance on disclosures in the SEO, social media and mobile devices areas. “There are certain ecommerce laws that desperately need clarification,” said Messing.

Messing stated that clients need to ask what their SEO company is doing and SEOs companies need to tell them, because ultimately, both can be held liable for unfair or deceptive content. He recommends ensuring that all claims made in SEO content be easily substantiated, and recommended building SEO through goodwill. “In the context of regulated industries,” he said, “consumers often visit healthcare or financial websites when they have a specific problem. If you provide them with valuable, reliable and understandable information, they will reward you with their loyalty.”

Messing cautioned companies to be careful of what information they collect for behavioral advertising, and to consider the privacy ramifications. “Data is currency, but the more data a company holds, the more potential liability it is exposed to.” Messing

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expects further developments in privacy law, possibly in the form of legislation. In the meantime, he recommends using data responsibly, and in accordance with the data’s sensitivity. “Developing policies for data collection, retention and deletion is crucial. Make sure your policies accurately reflect your practices.” Finally, Messing noted that companies lacking a robust compliance program governing collection, protection and use of personal information may face significant risk of a data breach or legal violation, resulting litigation, and a hit to their bottom lines. He recommends speaking to a law firm that is experienced in privacy and legal compliance for businesses to ensure that your practices do not attract regulatory attention.

Yesterday, the Federal Trade Commission (FTC) announced two proposed settlements of complaints filed against Ceridian Corporation and Lookout Services, Inc.   Both proposed consent orders require the companies to implement security measures similar to other such settlements, including development and implementation of more robust information security programs, along with biennial security assessments and reporting by qualified personnel for 20 years collaboration tools for business.

Ceridian provided payroll services allowing input of sensitive employee information such as social security numbers.  Lookout provided a tool to allow employers to create and track immigration status information for employees which also allowed input and storage of employee sensitive personal information.

Both companies made security representations on their web-pages and/or through customer contracts creating the impression that the companies used industry standard secure technologies and security practices to safeguard their customers’ employee information.

Hackers breached Ceridian’s online perimeter defenses through SQL injection attack, resulting in compromise of the sensitive data.

An employee gained unauthorized access to Lookout’s database by using “predictable resource location” – essentially a brute force attack using educated guessing to reveal hidden files or functionality using common naming conventions in order to by-pass Lookout’s secure log-in page.  In addition, Lookout supposedly allowed a “test” environment to allow access to real data, again enabling the Lookout employee to access sensitive information through logging-in with a “test” username, along with other predictable measures.  Lookout allegedly did not use an intrusion detection system, and did not review logs in a timely manner.

Lookout allegedly made the following claims in marketing materials:

“Although the data is entered via the web, your data will be encoded and transmitted over secured lines to Lookout Services server. This FTP interface will protect your data from interception, as well as, keep the data secure from unauthorized access. Perimeter Defense – Our servers are continuously monitoring attempted network attacks on a 24 x 7 basis, using sophisticated software tools.”

Ceridian allegedly made the following representations on its web-page and in contracts with customers:

“Worry-free Safety & Reliability . . . When managing employee health and payroll data, security is paramount with Ceridian. Our comprehensive security program is designed in accordance with ISO 27000 series standards, industry best practices and federal, state and local regulatory requirements.

Confidentiality and Privacy: [Ceridian] shall use the same degree of care as it uses to protect its own confidential information of like nature, but no less than a reasonable degree of care, to maintain in confidence the confidential information of the [customer].”

Although there are no admissions of liability in the settlements, the alleged liability in Lookout’s situation seems fairly clear.  As alleged, the interface simply did not protect the information, the company did not monitor its network, and sophisticated software tools were seemingly not in use.

The situation for Ceridian is somewhat more troubling.  Its claims and representations focused on the design of its security program, and using “reasonable care.”   The FTC alleged that Ceridian’s practices were not “reasonable.”  Specifically, the Commission alleged that Ceridian: “(1) stored personal information in clear, readable text; (2) created unnecessary risks to personal information by storing it indefinitely on its network without a business need; (3) did not adequately assess the vulnerability of its web applications and network to commonly known or reasonably foreseeable attacks, such as “Structured Query Language” (“SQL”) injection attacks; (4) did not implement readily available, free or low-cost defenses to such attacks; and (5) failed to employ reasonable measures to detect and prevent unauthorized access to personal info! rmation.”

It’s pretty much a given that if a hacker is intent on accessing your network, no amount of security layering will necessarily prevent that unauthorized access.  However, certain things are clear from these cases: companies must assess the sensitivity of the information they hold, and design and implement security programs which correspond to the risk associated with that information.  Even if layers of defense are employed, if you handle sensitive data, assessments of the need for encryption, hashing, truncation, tokenization, limitation and minimization, application and network vulnerability testing, and monitoring of the network systems must be considered and implemented where appropriate.

It is also extremely important to use language that accurately reflects what is supported in policies (public facing and internal), as well as in contracts and privacy and security addenda.  This is not an area to gloss over as an additional exhibit to a master agreement.  The language of privacy and information security addenda or stand-alone contracts, as well as the promises made in marketing materials, SOWs, websites, etc., must be accurate, and should not downplay risks.  In certain cases, more specific contractual obligations are better than broader “reasonable” clauses.  These might clearly define the security requirements to be implemented, and what can be supported.   A corollary to this, particularly in the SaaS service provider context is accurately advising the business customers about disclosures and consents to be made to the users and data subjects whose info! rmation will be processed through the use of the system.

Additionally, merely advising about all risks and disclaiming responsibility for everything is not sufficient, because of the negative effects on business and marketing.  There is also no guarantee that even if there is a broad advice and disclaimer concerning security risk, that the FTC would not seek to use its “harm based” as opposed to “deception based” approach.  That is, “You handle sensitive information under circumstances where the harm may outweigh the benefit; therefore, you have a concomitant responsibility to protect that information.”

Service providers (and others) handling sensitive information must develop, document, manage, and train on their information security architecture.  The risks and obligations spread clearly beyond simple security mechanisms, but to the whole panoply of security layering and defense in depth.