Cybersecurity compliance for regulated firms in South Dakota

Three parts

What a complete answer covers in South Dakota

In South Dakota, different licenses are overseen by different regulators. Where a rule below applies to one kind of firm, the text says so.

• The federal minimum. The FTC Safeguards Rule (16 CFR 314) treats a wide range of nonbank businesses as financial institutions, including mortgage lenders and servicers, consumer finance companies, tax preparers, collection firms, title and settlement agents, money services businesses, and dealers that arrange financing. A firm within its reach must keep a written security program, appoint a qualified individual to run it, and report to its board each year. Insurance producers and investment advisers fall outside the FTC's jurisdiction and answer to their own regulators, and banks and credit unions answer to their prudential regulators under the interagency information-security guidelines. Which side of that line a firm falls on depends on what it does and who supervises it.
• What a license adds in South Dakota. Conditions attach to whatever a firm is licensed or registered to do, and they differ widely from one type of license to another. Mortgage is the area where most of our work lies, and in South Dakota mortgage licensing is overseen by the South Dakota Division of Banking, Department of Labor and Regulation. South Dakota's definition of a mortgage lender includes servicing. Under SDCL chapter 54-14, a person who "for valuable consideration, originates, sells, or services mortgages" is a mortgage lender, as is anyone who holds itself out as doing so (definition at SDCL § 54-14-12). Such a person must hold a Mortgage Lender License from the Division of Banking, applied for through NMLS, unless exempt. Other licenses are overseen by other regulators and carry conditions of their own.
• What South Dakota law requires after a breach. South Dakota's breach-notification law (SDCL § 22-40-20) sets out what must happen, and how quickly, when residents' personal information is exposed.
• Your counterparties' requirements. Investors, warehouse lenders, carriers, underwriters and institutional clients send questionnaires of their own, and their reviews decide whether a relationship continues. Add the laws of each state where your customers live, and that is the list a firm has to answer. Our assessment begins by producing it, matched to your firm and with each source cited.

Also relevant in South Dakota: South Dakota's breach law gives businesses 60 days from discovery to notify affected residents, and any breach affecting more than 250 South Dakotans must also be reported to the Attorney General. The low threshold brings even modest incidents to the attention of the state's chief law-enforcement officer.

General information, not legal advice. Which of these requirements reach your firm depends on its circumstances. The assessment answers that question and names the source of each finding.