The industry organization that represents hundreds of broker-dealers, banks and asset managers is the latest big player to oppose Finra’s plan for a massive system that would collect sensitive data on their clients.
The Securities Industry and Financial Markets Association (Sifma) said the Comprehensive Automated Risk Data System, better known as CARDS, “would be a massive and invasive regulatory undertaking with serious privacy implications for the general public and added technology costs and regulatory burdens for the financial industry.”
The Financial Industry Regulatory Authority says it wants to implement CARDS to mine customer data for churning, pump-and-dump schemes, excessive markups and mutual fund switching.
But Ira Hammerman, Sifma’s executive vice president and general counsel, said the proposed system “raises serious questions about data security and privacy issues for retail investors, as it would create a centralized location for highly personal, private and sensitive consumer financial data.”
He added that CARDS would require tremendous resources from the financial industry and it isn’t clear why existing systems couldn't be used to accomplish Finra’s goals of being more efficient and effective.
In its comment letter, Sifma said CARDS would be a very costly reporting system and Finra should first determine how much of the information is already being collected by other means, such as the Consolidated Audit Trail (CAT) system.
Sifma’s comments come one day after the Financial Services Institute said the CARDS system won’t work.
The comment period on Finra’s CARDS proposal expires today.
While many in the brokerage industry have come out against CARDS, other groups have voiced support, in particular the Consumer Federation of America. In its recent comment letter, the federation acknowledged implementing the program would impose costs on firms, but the firms could also benefit if Finra is able to feed information back to them that supports their compliance programs.
"The biggest risk for investors of such a system—the risk that it would create a new and ultimately vulnerable database of sensitive personal financial data—appears to have been alleviated by Finra’s decision not to collect the information in a form that would identify the individual account owner," the federation said.
Finra announced earlier this month that it would scrap the idea of collecting identifying information on individual account owners.
"Ultimately, we believe the end result will be a more efficient and effective industry oversight program that will benefit both investors and those firms that take their compliance obligations seriously," the federation said.