Rep. Scott Garrett, R-N.J., chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, told the Financial Industry Regulatory Authority on Tuesday to hold off on its “costly and burdensome” plan to collect broker-dealer account data through its Comprehensive Automated Risk Data System (CARDS).

“After a preliminary reading of the proposed rule, I remain far from convinced that this new, costly and burdensome proposal is needed,” Garrett said in a statement.

FINRA released at the end of September the second iteration of its controversial CARDS plan and is now seeking comments on it. 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, from firms.

Susan Axelrod, executive vice president of regulatory operations at FINRA, said on Sept. 30 at the Financial Services Institute’s second annual Advisor Summit in Washington that FINRA was “committed” to CARDS and that FINRA would “go back to its board for feedback” and consider further revisions before sending the plan to the Securities and Exchange Commission for approval.

But Garrett said in his statement that he questioned whether “the purported benefits” of CARDS “will justify the significant costs.”

Said Garrett: “But even beyond the costs of the proposed rule, significant privacy concerns still linger, especially when the data are combined with other data in FINRA’s database. Before moving forward with this proposal, there needs to be a much better explanation of why this burdensome rule is necessary in the first place and what steps are being taken to protect investors’ personal financial information.”

FINRA said in releasing its rule proposal that CARDS would be implemented in phases, with the first phase requiring that carrying or clearing firms (approximately 200 firms) periodically submit in an automated, standardized format specific information that is part of the firms’ books and records relating to their securities accounts and the securities accounts for which they clear. The second phase of CARDS would require fully disclosed introducing firms to submit specified account profile-related data either directly to FINRA or through a third party.

The CARDS rule proposal would exclude the collection of personally identifiable information (PII) for customers, including account name, account address and Social Security number.

Garrett warned, however, that the Capital Markets and GSE subcommittee would “continue robust oversight of this potential new rule and, more broadly, FINRA’s structure, mission and regulatory activities.”

Check out FINRA Releases New Version of Controversial CARDS Plan on ThinkAdvisor.