Proposed Data Breach Mandate Sparks New Business Risks 

Troubling new legislation proposes a significant change to how businesses must respond to “massive” data security incidents of over 100,000 customer data points.

SB 117, introduced by the General Law Committee, requires affected companies to retain costly third-party forensic firms to conduct mandatory audits following qualifying data breach events.

These forensic reviews will not be discretionary or risk-based. Instead, they will be imposed by statute, regardless of the size of the business, the nature of the incident, or whether there is evidence of actual consumer harm. 

The bill will make Connecticut the first state in the nation to mandate third-party forensic audits as a standard component of incident response. 

In practice, this means businesses must open their internal systems, security architecture, and incident response processes to outside forensic firms, producing detailed analyses of vulnerabilities and controls. 

Mandate Concerns 

Connecticut’s business community broadly supports strong data protection standards and prompt breach notification.

Companies invest heavily in cybersecurity, employee training, insurance, and legal compliance, and they recognize the importance of protecting sensitive personal information. 

However, SB 117 has prompted concerns because it substitutes a one-size-fits-all mandate for a more flexible, risk-based approach.

Third-party forensic audits are complex, time-intensive, and expensive.

Businesses worry that the bill prioritizes procedural compliance over practical security outcomes, while imposing significant new costs and risks. 

Third-party forensic audits are complex, time-intensive, and expensive, often taking more than 90 days to complete.

Depending on scope, they can cost tens or even hundreds of thousands of dollars per incident—costs that will be incurred under the proposal regardless of whether sensitive consumer information was actually misused. 

Exposure Questions

Beyond cost, the bill raises questions about exposure.

Forensic audits necessarily involve deep access to internal systems and documentation. That access can reveal sensitive operational details, cybersecurity weaknesses, and internal decisionmaking processes that—if mishandled, disclosed, or later requested—could increase risk rather than reduce it. 

SB 117 does not clearly explain how mandating these audits improves outcomes for consumers, such as faster notification, better remediation, or reduced risk of identity theft.

“Requiring such reports to be turned over to the state creates unacceptable risk.”

CBIA’s Chris Davis

The absence of a direct connection between the requirement and measurable consumer benefit is a central issue for employers. 

“Forensic reports frequently contain highly confidential information about internal systems, vulnerabilities, and security architecture, and, if disclosed, would subject the systems to significant future risk of breach,” said Chris Davis, CBIA vice president of public policy.

“Requiring such reports to be turned over to the state creates unacceptable risk that proprietary or sensitive information could be exposed, further putting resident data at risk.” 

Small Business Impact 

While SB 117 will apply broadly, its effects will not be evenly distributed.

Small and midsized businesses, which make up the vast majority of Connecticut employers, are least equipped to absorb sudden forensic costs or manage complex audit processes. 

A mandatory audit could mean diverting resources away from wages, benefits, innovation, or proactive cybersecurity investments.

Unlike large corporations, smaller employers often lack dedicated cybersecurity staff, in-house counsel, or the financial flexibility to handle sixfigure compliance obligations.

For those firms, a mandatory audit could mean diverting resources away from wages, benefits, innovation, or proactive cybersecurity investments that actually reduce the likelihood of future incidents. 

Out-of-Step Approach 

Existing breach notification laws already focus on consumer awareness and accountability, and they allow companies to tailor response efforts to the specific facts of an incident. 

Fines proposed by the bill are also out of step of from other states’ policies.

Small businesses that do not immediately turn over forensic reports to the attorney general face fines of $100,000 while larger employers face a fine of $500,000. 

SB 117 places Connecticut in uncharted territory.

SB 117 places Connecticut in uncharted territory by requiring mandatory third-party forensic audits without a clear demonstration of added consumer benefit. 

“Cyber incidents are already costly and disruptive,” Davis said.

“Layering on excessive punitive penalties and costly third-party audits will divert resources away from remediation, consumer notification, and security improvements, while making Connecticut a less attractive place to do business—particularly for companies operating across multiple states with differing breach-response regimes.” 

As lawmakers consider SB 117, employers are urging a careful reassessment of whether its mandates improve data security—or whether they create new vulnerabilities that ultimately undermine the goals they seek to achieve. 

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 For more information, contact CBIA’s Chris Davis (860.244.1931).