SIFMA warns investors will pay for Finra CARDS plan

CEO Bentsen says new rules will mean either higher fees or fewer services

Jun 18, 2014 @ 11:02 am

By Joyce Hanson

The large and ever-growing volumes of data required for regulatory reporting are expensive, and investors will likely end up footing the bill for the coming data management crisis, SIFMA officials warned on Tuesday.

Securities Industry and Financial Markets Association's President and Chief Executive Kenneth E. Bentsen Jr., speaking at the SIFMA Tech 2014 conference in New York, pointed to the potentially onerous demands of the Financial Industry Regulatory Authority Inc.'s proposed Comprehensive Automated Risk Data System.

“Policy makers and regulators must consider that these additional new rules … will have to be absorbed by the firms and ultimately their customers through additional costs or reduced services and choice,” Mr. Bentsen said.

An SEC consolidated audit trail rule from 2012 required Finra to develop and maintain a system that collects and identifies stock and options orders and cancellations in all U.S. markets. Finra's CARDS proposal would require member firms to submit a standardized set of customer and product information.

Related to Mr. Bentsen's concern, Gerard Citera, associate general counsel at JPMorgan Chase & Co., said the financial services sector is weighed down by its need to store 20 million gigabytes of information. The cost of all that data management will fall on end investors unless broker-dealers find more innovative ways to pay for it, he said.

“My biggest concern is that the investor ultimately will pay for this,” Mr. Citera said.

But Steve Randich, Finra's executive vice president and chief information officer, told SIFMA conference goers that cloud computing should help keep costs down in the future.

“The industry bears our costs of regulation and surveillance. Commoditization of hardware and cloud computing will help us lower those costs,” he said.

But for now, the costs will be passed from broker-dealers to end investors, said Brian Miller, senior vice president of data management at Wells Fargo Advisors, who spoke on a panel that addressed the approaching data management crisis.

Although advisers may not like the costs that get passed on to their clients, Mr. Miller added, they must accept that those costs can't be avoided as the financial services sector scrambles to keep up with technology.

“Technological change is a requirement. It's not an option,” he said.


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