If you’re a small business in New York — especially in finance, insurance, or related industries — you’ve probably heard of NYDFS 500, the cybersecurity regulation from the NY Department of Financial Services.
Many small firms breathe a sigh of relief when they find out they’re “exempt.”
But here’s the problem:
Exempt doesn’t mean safe. And it definitely doesn’t mean off the hook.
Because there’s a federal rule that applies to you — and it’s not optional.
1. What is NYDFS 500?
NYDFS 500 is a New York-specific law that sets cybersecurity requirements for financial services companies, insurance agencies, and related firms.
It includes requirements like:
- Risk assessments
- Multi-factor authentication
- Encryption
- Incident response planning
- Annual certification
But here’s the kicker: Small businesses often qualify for exemptions.
That means they may not need to meet all the requirements — and that creates a dangerous false sense of security.
2. Why FTC Safeguards Changes Everything
Enter the FTC Safeguards Rule.
It’s a federal regulation — and nobody is exempt.
If you’re a business that collects personal information (especially in finance, tax prep, or insurance), you’re likely covered. That includes:
- Independent insurance agencies
- CPA firms
- Car dealerships
- Credit repair services
- Mortgage brokers
- Tax preparers
- Many more
Bottom line: If you collect consumer data, you must have a written information security plan and implement controls — no matter your size.
3. What You Actually Need to Do
The FTC Safeguards Rule has real teeth — and real consequences for ignoring it. Penalties can include fines, investigations, and loss of client trust.
At a minimum, you must:
- Conduct a risk assessment
- Design and implement safeguards (like firewalls, MFA, encryption)
- Monitor systems for vulnerabilities
- Train your staff
- Oversee third-party vendors
- Have an incident response plan
- Regularly test your program
Sounds familiar? That’s because it overlaps heavily with NYDFS 500.
So even if NYDFS “exempts” you, you’re still on the hook under federal law.
4. Why This Matters for Small Firms
Smaller firms are actually more vulnerable — not less.
- Fewer resources
- Less IT staff
- Fewer backups
- More reliance on trust and reputation
And unlike big companies, you don’t get a press release and a PR firm when you get hacked. You get client calls, lawsuits, lost business, and sleepless nights.
Cybersecurity isn’t about checking a legal box. It’s about protecting your business and staying insurable, credible, and competitive.
5. What to Do Next
Don’t wait until you’re fined — or breached.
✅ Get a proper cybersecurity risk assessment
✅ Build a plan that covers both NYDFS and FTC Safeguards
✅ Work with someone who understands the regulatory landscape — not just generic IT
Closing Thought:
Being “exempt” under NYDFS doesn’t mean you’re safe.
It means you’re potentially underprepared.
The FTC isn’t giving you a pass. And hackers aren’t either.
If you collect sensitive information, the time to act is now.