It looks as if Financial Industry Regulatory Authority’s reproposed plan to collect broker-dealer account data through its Comprehensive Automated Risk Data System (CARDS) will continue to be a hot-button issue as the Securities Industry and Financial Markets Association looks forward to 2015.
CARDS, which was the focus of SIFMA’s critical letter to FINRA on Monday and two prior comment letters, was the top discussion topic during SIFMA’s state of the industry press briefing Thursday morning in New York.
“I think [FINRA is] beginning to recognize that there is a great deal of concern from the industry and the general public,” said Ken Bentsen Jr., president and CEO of SIFMA, at the press briefing. Adding, “We are going to continue to raise concerns and questions and objections.”
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.
“I think you’ll also note that there’s pretty broad-based opposition to this big data approach to trying to collect all investor data on a monthly basis to be held in one quasi-government central data repository that our members feel is an invasion of privacy, raises significant cyber risk, and is effectively a sledgehammer approach to what FINRA has described as trying to identify much smaller problems at significant cost,” Bentsen said.
SIFMA believes the costs associated with implementing and maintaining CARDS is much higher than FINRA has estimated. SIFMA retained IBM to perform a detailed cost-benefit analysis of the CARDS proposal, estimating that Phase 1 of CARDS will cost the industry $680 million to build and $360 million annually for ongoing maintenance.
Bill Johnstone, chair of SIFMA’s board of directors, said, “Certainly there’s a concern about cost. We think the cost of implementing the system would be substantial, the cost of maintaining the system would be significant.”