firewall
Definition
In law, a firewall is a set of procedures and policies that a company puts in place to prevent sensitive or confidential information from flowing between two departments or groups that should not share that information. Businesses use this to avoid conflicts of interest, especially when different parts of the same company are working on competing or conflicting matters.
Example
A financial firm might use a firewall between its investment banking team and its stock trading team so that insider information about a company merger cannot be used to make profitable trades.
Watch Out
If your business handles sensitive client information across different departments, you may have a legal obligation to set up formal firewall policies, and failing to do so could expose you to serious liability.
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This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.