By Mark S. Bergman and Jillian M. Lutzy, of Paul, Weiss, Rifkind, Wharton & Garrison LLP, London.

The Staff of the Securities and Exchange Commission’s Division of Corporation Finance October 13, 2011, issued written guidance (CF Disclosure Guidance: Topic No. 2) setting forth the views of the Staff regarding disclosure obligations in respect of cybersecurity risks and cyber incidents. The guidance is the result of heightened risks related to cybersecurity and the increase in the frequency and severity of cyber incidents. These risks, in turn, have prompted registrants, counsel and auditors to focus on providing appropriate public disclosure without further compromising cybersecurity by conveying a roadmap to hackers through disclosures of vulnerabilities of systems and networks.

The guidance is intended to assist registrants in preparing disclosure under both the Securities Act of 1933 (the 1933 Act) and the Securities Exchange Act of 1934 (the 1934 Act). The Staff notes that, in addition to preparing line item disclosure, the guidance may also be relevant for registrants with shelf registration statements as they consider whether a Form 6-K or Form 8-K would be appropriate to disclose the costs or other consequences of material cyber incidents, and more generally for registrants as they consider their obligations under 1933 Act Rule 408 and 1934 Act Rules 12b-20 and 14a-9 and the antifraud provisions of the 1933 Act and the 1934 Act.

The guidance is effective immediately and applies to domestic SEC registrants as well as non-U.S. SEC registrants.

The guidance directs registrants to review, on an ongoing basis, the adequacy of their disclosures relating to cybersecurity risk and cyber incidents and addresses potential disclosure issues in the context of the following specific disclosure requirements…

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On October 27, 2009, proposed U.S. tax legislation entitled the “Foreign Account Tax Compliance Act of 2009” (the “Bill”) was introduced in both houses of the U.S. legislature and endorsed by the Obama administration[...] If enacted in its current form, the Bill would introduce a number of new provisions that would significantly modify the U.S. withholding tax and information reporting regimes affecting U.S. persons, non-U.S. banks and other financial intermediaries and their affiliates, non-U.S. hedge and private equity funds, and certain other non-U.S. investment structures…

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