Are You a Data Fiduciary or a Significant Data Fiduciary? Here’s How to Classify Yourself
The Digital Personal Data Protection (DPDP) Act, 2023 in India has been a pivot in the privacy debate moving it away from its intent to an impact. Virtually all organizations which handle personal data are Data Fiduciaries–not all Data Fiduciaries are the same under the law.
Other organizations have a greater responsibility due to the magnitude, sensitivity and danger of the information they handle. Such organizations can be informed as Significant Data Fiduciaries (SDFs), which provokes the appearance of new compliance, governance, and accountability requirements.
Table of Content
Understanding the Difference: Data Fiduciary vs Significant Data Fiduciary
How Is a Significant Data Fiduciary Determined?
Additional Obligations for Significant Data Fiduciaries
Why Most Organizations Underestimate Their SDF Risk
From Classification to Control: Where CryptoBind Fits In
The burning question that every organization has now to answer is easy:
Are you a Data Fiduciary are you a Significant Data Fiduciary injunction?
Understanding the Difference: Data Fiduciary vs Significant Data Fiduciary
Under the DPDP Act:
- Any entity that decides the purpose and manner of handling the personal data is defined as a Data Fiduciary.
- One of the subsets of Data Fiduciaries defined by the Government is A Significant Data Fiduciary (SDF) depending on the risk factors that predispose the risk of harm to individuals.
This classification is not self-imposed, self-proclaimed or fixed. It operates on actual practical facts and not what your privacy policy purports.
How Is a Significant Data Fiduciary Determined?
DPDP Act will enable the Government to inform SDFs upon certain criteria. In reality, there are five dimensions in which organisations need to evaluate themselves.
- Quantity of Personal Data Processed.
In the case your organization is processing personal data in large quantities, you are already in the radar of SDF.
Real-world scenario: A 5 million-user fintech app that gathers KYC information, transaction history, and behavioral analytics, regardless of whether or not automated, is working with a volume of data, the abuse or attack of which may affect millions.
High data volume increases:
- Breach impact
- Consent management complexity
- Regulatory scrutiny
2. Sensitivity of the Data
Sensitive personal information immensely increases the fiduciary responsibility.
This includes:
Financial information
Health records
Biometric identifiers
Precise location data
Government identifiers
Scenario:
The existence of a health-tech platform capable of collecting diagnostic reports and wearable health information can serve only 200,000 people, but the sensitivity of the information can be sufficient in itself to qualify SDF classification.
In this case, it is more risk than raw volume.
3. Risk of Harm to Data Principals
The DPDP Act makes much emphasis on harm that can be committed, rather than the intent.
Harm may include:
- Financial fraud
- Identity theft
- Surveillance or profiling
- Discrimination or exclusion
Scenario:
The HR SaaS in place to process employee metric on performance, and background check information might, unintentionally facilitate profiling or discrimination in decision-making in case of control failures.
Even B2B systems are not an exception.
4. Use of New or Emerging Technologies
The use of AI, ML, behavioral analytics, or automated decision-making by organizations is scrutinized more.
Scenario:
A dynamic pricing system where AI is used on the price of products depending on user behavior, indirectly discriminates or manipulates users in an e-commerce platform.
The fuzzier the technology the greater the fiduciary expectation.
5. Impact on Sovereignty, Public Order, or Electoral Processes
Platforms involved in:
- Digital identity
- Public services
- Financial infrastructure
- Massive citizen databases.
have higher chances of being called SDFs.
Scenario:
A government contractor dealing with citizen grievance forums or welfare databases can deal with legal data–but the risk of the system itself increases fiduciary duty.
Additional Obligations for Significant Data Fiduciaries
In case you were told that you are an SDF, your compliance posture should not remain on the paper, but be operational enforcement.
1. Mandatory Data Protection Impact Assessments (DPIA)
SDFs must conduct DPIAs to:
- Identify privacy risks
- Assess harm likelihood
- Institute risk mitigation strategies.
DPIAs are not checklists. They require the visibility of data flow, system level controls and ongoing re-evaluation.
2. Appointment of a Data Protection Officer (DPO)
SDFs must appoint a DPO who:
- Is based in India
- Reports to the top management.
- Represents the Data Protection Board main point of contact.
This is not a symbolic role. DPOs cannot comply with regulatory expectations without being able to look under the hood and exercise control.
3. Annual Independent Data Audits
SDFs should be audited periodically to determine:
- Compliance effectiveness
- Technical enforcement
- Vendor and processor risk
It is here that most organizations fail at- since actual control is what is being tested during an audit, and not intent.
Why Most Organizations Underestimate Their SDF Risk
Many organizations believe:
- “We already have consent”
- “We are ISO certified”
- “Our data is encrypted”
DPDP compliance however is not an issue of individual controls. It is of the end-to-end data control- cloud, applications, vendors, and users.
It is in this area that enforcement loopholes occur.
From Classification to Control: Where CryptoBind Fits In
It is at this juncture that solutions such as CryptoBind would be of critical need, not as a compliance tool, but as a data control infrastructure.
CryptoBind enables organizations to:
- Maintain cryptographic keys of personal data.
- Enforce encryption, tokenization, and key ownership across environments
- Support system level visibility of DPIAs.
- Minimize breach and audit pain with HSM-based key management.
CryptoBind is useful to organizations that are close to SDF limits, and they need to change compliance, not a luxury, to an active enforcement mechanism rather than reactive documentation.
Final Thought: Don’t Wait for the Notification
The status of SDF is not a badge, it is a red flag.
Those organizations who actively evaluate the data scale, sensitivity, and processing risks are much better placed compared to those regulatory designated.
The DPDP Act is clear:
The greater the influence, the higher the level of accountability.
