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After reporting earlier this month that the Securities and Exchange Commission had joined the federal investigation into Facebook over its failure to disclose Cambridge Analytica's misues of user data, the Wall Street Journal revealed on Thursday exactly what the agency is investigating.
In keeping with its mission to police securities markets, the SEC is looking into whether Facebook's failure to warn investors about the potential for third-party developers to misuse their data represents a violation of disclosure laws.
SEC - Interest - Months - Data-security - Breaches
The SEC has shown greater interest in recent months in probing data-security breaches and lapses. The agency has taken the position, most recently in a case filed against Altaba Inc., Yahoo Inc.’s successor company, that public companies must disclose material data leaks or breaches they know about. Telling investors that such incidents could happen isn’t good enough.
The Justice Department and the Federal Trade Commission are also probing the data leak and how Facebook and other parties handled it. The FTC is probing whether Facebook violated terms of an earlier consent decree requiring the company to get user consent for collecting personal data and sharing it with others.
SEC - Facebook - Shareholders - Knowledge - Cambridge
The SEC is probing whether Facebook should have disclosed to shareholders its knowledge of the Cambridge Analytica violation in 2015, when it learned that Aleksandr Kogan, a professor at the University of Cambridge, had improperly shared data in 2014 for as many as 87 million Facebook users with Cambridge Analytica.
Essentially, the crux of the SEC investigation is whether the fact that Cambridge Analytica improperly used Facebook user data represented material information that should've been disclosed to investors.
Facebook - Officials - Information - Investors - Data
Facebook officials believed in 2015 that what they discovered wasn’t material information for investors, because the data shared with Cambridge Analytica...
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