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Regulation and Compliance > Federal Regulation > FINRA

Investors Say No to FINRA’s CARDS Plan

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Investors are opposed to the Financial Industry Regulatory Authority’s plan to collect broker-dealer account data through its Comprehensive Automated Risk Data System proposal, according to a just-released survey commissioned by the Securities Industry and Financial Markets Association.

The survey, released Monday, commissioned by SIFMA and conducted online in November by Harris Poll among 1,103 U.S. investors, found that over two-thirds (69%) of investors oppose CARDS initially after reading a brief and balanced description of CARDS. SIFMA said that the level of opposition went up “to four in five” (80%) after investors read the different concerns that have been expressed regarding the CARDS plan.

“The data from this survey reveals that investors have serious concerns about the CARDS proposal and the risks such a system could pose to their privacy and the security of their most personal financial information,” said Kenneth Bentsen, Jr., SIFMA’s president and CEO, in a statement. More than “two-thirds of investors oppose CARDS after reading a balanced description of the proposal. That number in opposition jumps to four in five after investors read more about the concerns with CARDS. Similarly, seven in 10 investors believe the risks posed by CARDS outweigh the benefits when initially asked for their view, and that number increases to nearly eight in 10  after reading more about the challenges posed by CARDS.”

Bentsen added that the survey shows “very clearly, the tremendous level of investor opposition to the proposal that FINRA collect all their individual account data on a regular basis. Notwithstanding the good intentions of FINRA, this further serves to cast even more doubt on the appropriateness of this proposal.”

In late-September, FINRA released the second iteration of its controversial CARDS plan and sought comments on it through Dec. 1. FINRA spokesman George Smaragdis told ThinkAdvisor in early December 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.” 

Further highlights of the survey’s findings include:

Seven in 10 investors agree that the benefits of CARDS do not outweigh the risk when asked about threats (71% agree “the risks of FINRA’s proposal outweigh the benefits, even if the data is kept anonymous, because it will create a new singular location that hackers and cyber terrorists can target, putting investors’ account activity balances and money movements at risk.”) After reading more about the challenges presented by CARDS, that number increases to 78%.

When introduced to more specific and nuanced information about the risk the CARDS system poses to privacy and security, investors agree the risks are high and they trust their financial professional to protect their interests.

Regarding cybersecurity risk, 82% of investors strongly or somewhat agree with the statement that “the protection offered by FINRA tracking my anonymized investment activity is not worth the risk of having all of my investment activity stored in one place.”

Regarding privacy, 80% strongly or somewhat agree with the statement that “the protection offered by FINRA tracking my anonymized investment activity is not worth the risk to my privacy,” while 86% strongly or somewhat agree with the statement that “my financial professional is best suited to run and maintain their own database to track this type of information. Securities firms have a responsibility to their clients to protect their personal and financial information.”

Only 13% of investors trust the government the most to keep their financial information secure compared to 87% of investors who trust their financial professional or firms the most to keep their personal financial information safe.

— Related: SIFMA Chief Slams CARDS Plan


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