CSL CSL Corporate Liability & Risk Management 1

Question 1

Under which legal theory can a corporation be held liable for cybersecurity failures of its officers if those failures resulted in harm to shareholders?

Accepted Answer

Breach of fiduciary duty

Answer

Corporate directors and officers owe fiduciary duties of care and loyalty to shareholders, and systematic failure to oversee cybersecurity risks can constitute a breach.

Question 2

What is the primary legal standard that protects corporate directors from personal liability for good-faith cybersecurity decisions that later prove wrong?

Accepted Answer

Business judgment rule

Answer

The business judgment rule protects directors who make informed, good-faith decisions in the corporation's best interest, even if those decisions lead to losses.

Question 3

The SEC's 2023 cybersecurity disclosure rules require public companies to disclose material cybersecurity incidents within how many business days of determining materiality?

Accepted Answer

4 business days

Answer

The SEC's 2023 rules require disclosure of material cybersecurity incidents on Form 8-K within four business days of determining the incident is material.

Question 4

Under FTC Act Section 5, what cybersecurity standard are companies held to when they fail to protect consumer data?

Accepted Answer

Unfair or deceptive trade practices standard

Answer

The FTC uses Section 5's prohibition on unfair or deceptive acts to enforce cybersecurity, finding violations when companies fail to maintain reasonable security promised to consumers.

Question 5

Which legal doctrine can hold a parent company liable for cybersecurity failures of its subsidiary?

Accepted Answer

Both A and B depending on facts

Answer

Courts may pierce the corporate veil when a subsidiary is merely an alter ego of the parent, or apply respondeat superior when parent employees directed the subsidiary's operations.

(CSL) Cybersecurity Law Certification Practice Test

(CSL) Cybersecurity Law Certification Practice Test

CSL CSL Corporate Liability & Risk Management 1