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Compliance May 1, 2015
CARDS Initiative Tabled for Now by FINRA
Comments delivered by FINRA leadership suggest the financial industry regulator is pumping the breaks on its controversial CARDS initiative.
Reported by Jill Cornfield
The Comprehensive Automated Risk Data System (CARDS) aimed to standardize and automate account activity and security reviews for its members. Among other goals, the CARDS system would help FINRA quickly and automatically identify potentially problematic sales behaviors among producing advisers and brokers.
Richard Ketchum, chair and chief executive of the Financial Industry Regulatory Authority (FINRA), spoke with lawmakers in Washington before the House Financial Services Committee and said the proposal would receive more study to determine whether it would make broker data vulnerable, according to prepared remarks published online.
Ketchum said in his statement that the regulator is in the process of evaluating numerous comments about the CARDS proposal, and meeting with industry and investor groups, as well as individual firms, to ensure that they understand all the concerns put forward.
“Even though we are not proposing to collect personally identifiable data (such as name, address and Social Security number) as part of this initiative, we understand and share the concerns raised around the potential ability of bad actors to access information that could possibly be reengineered to identify individuals,” Ketchum said.
A number of financial services industry groups immediately circulated statements thanking Ketchum and FINRA for agreeing to closely review their concerns.
“We commend FINRA for recognizing the industry’s concerns with respect to the sensitivities involving client information, the burden of building yet another reporting system, and the abundance of data already received,” said Ira D. Hammerman, executive vice president and general counsel of SIFMA.
David Bellaire, executive vice president and general counsel of the Financial Services Institute (FSI), said the organization is deeply committed to the investor protection goals of CARDS. “However, we have concerns about preserving the data security and privacy of CARDS,” he said. “We applaud FINRA for listening to the concerns of the industry and investors and proceeding carefully as it works to improve investor protection through the use of market data.”