Finra CEO Rick Ketchum backs off data collection plan

Regulator says worry over security of customer information warrants reexamination

Apr 30, 2015 @ 4:09 pm

By Mark Schoeff Jr.

Finra is putting the brakes on its proposal for a massive data-collection system over concerns about the security of customer information, the organization's chief executive is expected to tell Congress on Friday.

The Financial Industry Regulatory Authority Inc. has received strong industry resistance to its so-called Comprehensive Automated Risk Data System over its potential costs and the possibility that it will expose customer data to hackers. The comment period for the proposal ended on Dec. 1 last year.

In prepared testimony, Finra chief executive Rick Ketchum said that although CARDS will not collect client names, addresses and Social Security numbers, Finra shares concerns about “bad actors” being able to obtain information that “could possibly be reengineered to identify individuals.”

The regulator is studying the potential data-security threats, Mr. Ketchum will tell the House Financial Services Committee, and is evaluating whether CARDS data can be collected through “existing data sources.”


“To be clear, we will not move ahead with the present form of the proposal and will not move forward with an amended version until we conclude that the concerns raised in the comments have been addressed,” Mr. Ketchum said.

Finra, the industry-funded broker-dealer regulator, floated the CARDS proposal as a concept release in December 2013. It was formally proposed last September.

The mechanism would collect reams of brokerage account information on a monthly basis and analyze it for sales trends that could potentially harm investors. Finra has said that CARDS would help it become a more data fluent and nimble regulator.

But the proposal has drawn criticism not only from the industry but also from Capitol Hill. Rep. Scott Garrett, R-N.J. and chairman of the House Financial Services subcommittee before which Mr. Ketchum will testify, told Finra last year that he is “far from convinced that this new, costly and burdensome proposal is needed.”

In other parts of his testimony, Mr. Ketchum said that Finra's High Risk Broker initiative has resulted in the barring of 140 registered representatives from the industry. He also said that a task force studying Finra's arbitration system will make its recommendations by December.


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