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Privacy? WHAT privacy? Suit vs. SEC (link only, from "Investment News")


  • The SEC exemption order being appealed provides a mechanism for the SEC to separate out personally identifiable information (PII) from its Consolatidated Audit Trail (CAT) database. As near as I can tell (I'm not inclined to dig too deeply into this), the American Securities Association (ASA) is appealing this because it claims that such personal info (e.g. SSN, date of birth) serves no useful purpose whatsover.

    Here's ThinkAdvisor's reporting on the American Securities Association (ASA) petition.

    It includes a link to a 1,629 page filing. Only the first four pages are new. The rest are attachments: the SEC exemption order (March 17, 2020), an older SEC order (November 15, 2016), and an SEC final rule (July 18, 2012).

    The petition is to "modify or set aside in pertinent part" these orders.

    While I am a strong privacy advocate, on its face the PR (including a WSJ op ed) seems to be at least in part about spin. It makes noises about lack of security, but that's a distraction. Once one makes the argument that the personal info serves no benefit at all, security is irrelevant.

    Security issue as distraction. According to the ThinkAdvisor piece
    In the suit, the ASA requests an alternative approach to the CAT’s generation of a customer ID that does not require broker-dealers to report individual clients’ Social Security or taxpayer identification numbers to the CAT.
    Yet that's just what the exemption order being appealed does.
    Participants seek exemptive relief from ... the CAT NMS Plan (1) to allow for an alternative approach to generating a CAT Customer ID (“CCID”) without requiring Industry Members to report individual social security numbers or tax payer identification numbers collectively, “SSNs”) to the consolidated audit trail (“CAT”) (the “CCID Alternative”); and (2) to allow for an alternative approach which would exempt the reporting of dates of birth and account numbers associated with natural person retail Customers to the CAT ...

    [T]his Order grants the Participants’ request for exemptions ... subject to certain conditions.
    It goes on to say that use of the CAT Customer ID (CCID) "allow[s] the elimination of SSNs from the CAT."

    Argument that personal info is of no use. ASA's website says that:
    The collection of retail investor PII in no way bolsters the ability of the SEC to oversee equity markets more effectively as the Commission has brought over 400 insider trading cases between FY2011-2019 (averaging over 44 per year). These numbers clearly illustrate that (1) the SEC has no issue in bringing insider trading cases against individuals who violate its rules, and (2) collecting retail investor will needlessly subject millions of American investors to identity theft by cyberhackers for no regulatory benefit.
    I've highlighted some of the more breathless phrases.

    400 cases in a decade is presented with no context. Is this a large number? We're supposed to think so. Like saying that some number of people have been tested for COVID-19 without saying how many could have been tested with better procedures.

    I really don't know what the cost/benefits are. What I do see, though, is just one side being presented through press releases.

  • ......So, that industry group is simply not wanting to bother with those reporting requirements? I note your use of the term, "spin." It would make sense to me: re-framing something to make it look stupid and useless and inhibitive, so that they don't have to follow that rule, anymore. I'm very well aware--- as should we all--- that Big Money will NEVER choose to police itself and its clients. As far as they're concerned, the less they have to do, the better. So, "privacy" is "spin," here. (?)
  • Yes, color me suspicious. Though in general, any press release put out by a company or organization must be regarded as an advocacy piece, aka "spin". Likewise for third party reporting based upon PRs.

    The ASA news release on their website (linked to, above), cites approvingly a letter sent by five "Senior members of the House Financial Services Committee". The news release points to it as calling on the SEC to remove personally identifiable info from the CAT database.

    Actually, the letter praises the SEC for saying that it would not require SSNs or various other personally identifiable info to go in the CAT database. What these five GOP House members praised ultimately became the exemption order that ASA is petitioning to set aside. So outside of complaining about reporting in general, what is the point of the ASA petition?

    The letter from these Congressmen begins:
    We write in strong support of your recent comments indicating that the Securities and Exchange Commission (SEC or Commission) will significantly limit its collection of retail investors' personally identifiable information (PII) as pait of the Consolidated Audit Trail (CAT). We welcome your statement that the Commission will not require retail investors' Social Security numbers to be collected and stored in the CAT. We appreciate the Commission's ongoing work on the CAT and agree that it is important for regulators to be able to oversee the capital markets on a consolidated basis. However, we strongly believe that the CAT can, and should, fulfill its intended purpose without collecting Main Street investors' PII.
  • Thank you. Glad I mentioned it.
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