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December 02, 2014 at 03:21 PM
The Financial Industry Regulatory Authority’s reproposed plan to collect broker-dealer account data through its Comprehensive Automated Risk Data System (CARDS) is drawing heavy criticism from industry trade groups. In the face of such negative comments, FINRA insists that it will address such issues prior to further development of the data program.
FINRA spokesman George Smaragdis told ThinkAdvisor Tuesday that the self-regulator “welcomes comments on this important proposal and takes these comments very seriously. We are keenly focused on the specific issues raised in the comment letters, and we intend to address any and all meaningful risks before moving forward.”
In late-September, FINRA released the second iteration of its controversial CARDS plan and sought comments on it through Dec. 1. 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.
The Securities Industry and Financial Markets Association said in its comment letter that FINRA not only lacks the statutory authority to move ahead with CARDS, but that its costly data collection plan “is an attempt to diagnose a regulatory ill without appropriately accounting for the impact on investor privacy and civil liberties,” and that the plan would be a “prime” target for hackers.
SIFMA told FINRA on Monday that instead of sending the revamped CARDS plan to the Securities and Exchange Commission for approval, FINRA should conduct a thorough cost-benefit analysis on the rule and provide it to member firms for comment.
Kenneth Bentsen, SIFMA’s president and CEO, said in the comment letter that CARDS would “infringe upon investors’ right to privacy by mandating that brokerage firms turn over to FINRA all individual account information on a monthly basis,” which would result “in the creation of a centralized database of all individual brokerage accounts, updated monthly and held by a quasi-governmental entity.”
