Broker-dealer trade groups are fighting back against the Financial Industry Regulatory Authority’s proposed Comprehensive Automated Risk Data System (CARDS) as they say it presents “serious privacy” concerns and is a “huge” regulatory undertaking with significant costs.
The original comment period on the plan expired on Feb. 21, but FINRA extended the comment period another month, to Friday.
As FINRA explains, CARDS would be a rule-based program that would allow FINRA to collect — on a standardized, automated and regular basis — account information, as well as account activity and security identification information that a firm maintains as part of its books and records.
The automated system would gather data from broker-dealers and clearing firms that the regulator can then use to spot potential problems with sales practices of individual BDs, branches and reps prior to onsite FINRA exams.
FINRA said in early March that it would modify its originial approach by not collecting sensitive personally identifying information from the data it receives from CARDS.
FINRA stated that after considering the written comments on the CARDS concept proposal and the views expressed in FINRA staffers’ discussions with industry participants on investor privacy, FINRA “has concluded that the CARDS proposal will not require the submission of information that would identify to FINRA the individual account owner, particularly, account name, account address or tax identification number.”
Barbara Roper, director of investor protection for the Consumer Federation of America, told FINRA in her comment letter that “the biggest risk for investors of such a system — the risk that it would create a new and ultimately vulnerable database of sensitive personal financial data — appears to have been alleviated by FINRA’s decision not to collect the information in a form that would identify the individual account owner.”
But the Financial Services Institute told FINRA in its Thursday comment letter that the move does not erase other concerns related to CARDS.