FINRA Prepares to Ramp Up Data Collection & Monitoring Despite Industry Opposition

May 26th, 2014

The Financial Industry Regulatory Authority (FINRA) continues to move forward with plans to roll out its Comprehensive Automated Risk Data System (CARDS), originally proposed in December 2013.  Earlier this week, FINRA announced new technology staff hires, boosted investment in data analytics, and committed to a 2015 CARDS launch date.


In light of increased scrutiny of dark pools and high frequency trading (HFT), as well as increasing technological complexity on Wall Street, regulators have sought to augment their oversight abilities.  CARDS will collect broker data and individual transaction information on a regular basis from 4,300 covered entities; whereas, FINRA currently gathers a portion of this information from periodic tests and examinations. The scope of the program’s data collection is expected to expand after its initial phase to include information on mutual funds, variable annuities, direct participation programs and non-traded real estate investment trusts (REITs).  The information collected is intended to help FINRA better identify and track patterns of misconduct and illegal transactions.


The program has received considerable industry pushback.  FINRA received more than 800 comment letters in response to its original proposal raising concerns related to privacy, data security, compliance costs and burdensome reporting.  In response to industry concerns, FINRA amended the CARDS proposal slightly to ensure that no private data is collected and eliminate standardized reporting formats, but appears to be pushing ahead as planned.  In order to meet its 2015 deadline, the proposal will move to the FINRA board in July for approval, then to the Securities and Exchange Commission (SEC).


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