FINRA’s holiday ‘CARDS’

Few Americans have even heard of the Financial Industry Regulatory Authority (FINRA), but the securities regulator is about to become intimately familiar with all Americans’ investment portfolios. FINRA recently proposed the Comprehensive Automated Risk Data System, known by the less scary-sounding shorthand “CARDS.” In the name of investor protection and investor confidence, FINRA plans to monitor all securities accounts and transactions. Investors should run from this kind of protection. FINRA is a quasi-governmental organization that oversees the brokerage industry. It derives its exclusive powers from, and is in limited measure accountable to, the Securities and Exchange Commission. FINRA sets its own agenda, salaries and budget and is governed by a board of directors, some of whom represent industry and the majority of whom purportedly represent the public. As a new working paper released by the Mercatus Center at George Mason University discusses, FINRA is not truly accountable to the public, the industry or government. This lack of accountability matters because FINRA’s influence and power are growing. FINRA has grand plans for CARDS. Brokerage firms will be required to transmit monthly to FINRA information about customer profiles, account transactions and holdings. FINRA will use these data to assess how well brokers are serving their customers and to watch for unusual customer behavior. More on The Hill here.

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