The Securities and Exchange Commission announced that Pearson plc, a London-based public company that provides educational publishing and other services to schools and universities, agreed to pay $1 million to settle charges that it misled investors about a 2018 cyber intrusion involving the theft of millions of student records, including dates of births and email addresses, and had inadequate disclosure controls and procedures.
The SEC’s order finds that Pearson made misleading statements and omissions about the 2018 data breach involving the theft of student data and administrator log-in credentials of 13,000 schools, district, and university customer accounts.
In its semi-annual report, filed in July 2019, Pearson referred to a data privacy incident as a hypothetical risk, when, in fact, the 2018 cyber intrusion had already occurred. And in a July 2019 media statement, Pearson stated that the breach may include dates of births and email addresses, when, in fact, it knew that such records were stolen and that Pearson had “strict protections” in place, when, in fact, it failed to patch the critical vulnerability for six months after it was notified.
The media statement also omitted that millions of rows of student data and usernames and hashed passwords were stolen. The order also finds that Pearson’s disclosure controls and procedures were not designed to ensure that those responsible for making disclosure determinations were informed of certain information about the circumstances surrounding the breach.
“As the order finds, Pearson opted not to disclose this breach to investors until it was contacted by the media, and even then Pearson understated the nature and scope of the incident, and overstated the company’s data protections,” said Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit. “As public companies face the growing threat of cyber intrusions, they must provide accurate information to investors about material cyber incidents.”
The SEC’s order found that Pearson violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 and Section 13(a) of the Exchange Act of 1934 and Rules 12b-20, 13a-15(a), and 13a-16 thereunder. Without admitting or denying the SEC’s findings, Pearson agreed to cease and desist from committing violations of these provisions and to pay a $1 million civil penalty.
The SEC’s investigation was conducted by Arsen Ablaev and Christine Bautista Jeon of the Chicago Regional Office and supervised by Amy Flaherty Hartman and Ms. Littman of the Cyber Unit.
