Investors Dealt a Bad CARD?

January 4, 2015 Uncategorized
The Financial Industry Regulatory Authority (“FINRA”) recently ended a comment period on a program known as CARDS, formally known as the Comprehensive Automated Risk Data System.  As proposed by FINRA, CARDS will be a data collection program by FINRA that “would be implemented in phases and would exclude the collection of personally identifiable information (“PII”) for customers, including account name, account address and tax identification number. The first phase would require approximately 200 carrying or clearing firms (i.e., firms that carry customer or non-customer accounts or clear transactions) to 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 information to be submitted would include data relating to securities and account transactions, holdings, account profile information (excluding PII), and securities reference data.”
As might be suspected, proponents and opponents of CARDS are rallying their respective troops.  From a regulatory perspective, FINRA believes that “CARDS would be designed to enhance investor protection and ensure market integrity by allowing FINRA to identify and quickly respond to high-risk areas and suspicious activities that it might not identify through its current surveillance and examination programs.”
In other words, CARDS is designed to enhance market surveillance and assist regulators in uncovering frauds, scams, and other menaces to the investing public.
On the other side of the divide are securities industry groups and privacy advocates that believe CARDS is yet another data collection tool that is unnecessary given the benefit conferred against the burden imposed on the securities industry.  SIFMA cites statistics that show eighty percent (80%) of the investing public are wary of the enhanced data collection that CARDS would impose.
What is the future of CARDS?  Expect a protracted fight; Congress is starting to weigh in, and that likely means a battle of attrition between the respective camps.
Uploaded by Ryan Gustafson, esq. on January 4, 2015.