A House leader with influence over financial markets policy has told Finra to slow down its initiative to collect massive amounts of customer data.
In a statement released Tuesday, Rep. Scott Garrett, R-N.J., said that after reviewing the regulatory notice
Finra issued on Sept. 30, he is “far from convinced that this new, costly and burdensome proposal is needed.”
Mr. Garrett, who heads the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, said Finra must prove that the benefits of the so-called Comprehensive Automated Risk Data System outweigh the costs that would be imposed on brokerages. He also cited concerns about customer privacy.
“Before moving forward with this proposal, there needs to be a much better explanation of why this burdensome rule is necessary in the first place and what steps are being taken to protect investors' personal financial information,” Mr. Garrett said. “The Capital Markets and GSE Subcommittee will continue robust oversight of this potential new rule and, more broadly, Finra's structure, mission and regulatory activities.”
A spokeswoman for the
Financial Industry Regulatory Authority Inc., the self-funded broker regulator, was not immediately available for comment.
In a
recent interview, Finra chief economist Jonathan Sokobin said the organization is studying the impact of the proposal on small brokerage firms.
Finra argues that frequent market data aggregation through CARDS would enable it more quickly to detect dangerous industry trends and harmful sales practices that it now must monitor on a firm-by-firm basis. Personally identifiable customer information will not be collected, Finra has said.
The plan, which was first introduced as a concept release in December, has drawn sharp criticism from the brokerage industry with regard to risk to customer data and the technology spending it might require.
Mr. Garrett is the first House member to say he wants to step up oversight of Finra, which reports to the Securities and Exchange Commission.
The congressman has consistently advocated that financial regulators conduct thorough cost-benefit analyses before proposing rules.
“[Mr.] Garrett is for smart, efficient regulation,” said his spokeswoman, Maggie Seidel. “He's done this with a lot of agencies. Why should Finra be any different?”
