What little financial privacy you have when trading stocks is going to get even smaller next month. When you trade a stock, you already need a broker Bank Secrecy Act To maintain its records, monitor your trading activity, and report suspected illegal activity to the federal government. But, starting in March, your broker will have to report all your trades, including your personal information, directly to a massive government database. If the Bank Secrecy Act concern Wait until you—and even if you don’t—hear about you Integrated audit trail (Cat).
The consolidated audit trail is intended to collect and accurately identify every order, cancellation, modification and trade execution for all exchange-listed equities and options across all US markets, allowing the Securities and Exchange Commission (SEC) to track the orders and identify who made them. gives their
The SEC ordered the creation of the CAT in 2012 after regulators had difficulty identifying the factors in 2010.”Flash crashAt the time, then-SEC Chair Mary Shapiro described As CAT regulators “provide the data and means to rapidly improve [their] ability to oversee a highly complex market structure.” And in the years since, CAT has been championed as essential to the SEC’s enforcement efforts.
CAT began collecting trading data in 2020, after years of development the challenge And Controversy. It is scheduled to begin collecting customer information March 17, 2023. Although the SEC has limited The opportunity to collect customer information—basic plans for Social Security numbers, dates of birth, and account numbers—brokers still need to provide customer names, addresses, and birth years that allow for easy identification of individual investors.
This massive surveillance database is a financial privacy nightmare.
Much of the criticism leveled at CAT has focused on data protection. CAT will absorb information about billions of trades daily, making it the largest database in the world. Its sheer size would be an invitation to criminals, who were then-SEC Chair Jay Clayton Recognized In 2017 “may potentially obtain, disclose and profit from trading activities and investors’ personally identifiable information.”
Governments are hardly immune to hacking; In fact, the SEC itself was hacked In 2016. Thousands of users (not just at the SEC) will have access to CAT, with Ambiguous values Accessing data dictates their use, creating even more security gaps. And when the S.E.C Recommended A rule to address some data protection concerns in 2020, the company has taken no action To finalize that rule or something similar (a Flurry other rule making)
But these criticisms seem to assume that if the government has adequate data security, such intrusions into Americans’ financial privacy will be acceptable. That is simply not the case. Personal and financial privacy are key elements of life in a free society, where individuals enjoy a private sphere free from government involvement, surveillance and control. Hester Pierce as SEC Commissioner Recognized:
Our purchases and sales of securities, especially when aggregated together as CAT will do, are a rich form of price exposure. They can express how markets work, a determination on market efficiency, expectations about the future, or even a moral philosophy.
Trading is thus an expressive activity, and CAT raises the same civil liberties concerns as other mass surveillance programs. It doesn’t matter if the SEC has good intentions to just use the CAT to better understand our markets and enforce existing laws. Financial privacy is important because it can be the difference in Survival and persecution of those who hold opposing views.
Thus, CAT is not only burdened by Americans First Amendment The right to speech and expression but their rights under Fourth Amendment To be free from unreasonable government searches and seizures. Although the Supreme Court in 1976 the case Given that the Bank Secrecy Act found that information shared with third parties—there, banks—is not protected by the Fourth Amendment, the doctrine is ripe for reconsideration. The Ubiquitous Role of Mediators In modern life. But while CAT’s surveillance is not constitutionally deficient, its data collection is There is a problem And should not be treated differently than other areas of American life where people rejection Broad based monitoring of their activities.
This is particularly true where the benefit of surveillance appears to be marginal. The SEC is not without power CAT lacks the ability to analyze trading data, though it’s understandably tempting for agencies that want to see every trade in near real-time. something there is Recommended alternative to ban personal information from the database, while periodically leaving the SEC to make case-by-case requests to brokers. Customer privacy (especially where SEC Enforcement case touting CAT data is fetched before personal information is included). But such solutions leave surveillance devices in place; Another Dr. on the advice of Commissioner Pearce Limited database Institutional investors trading or improvement Systems already in place to protect the privacy of individual investors are better choices.
CAT threatens the privacy of American investors. Simple knowing that the SEC is watching your every trade is a huge cost to SEC enforcement. Despite years of planning and already spent, the SEC should put the CAT back in the bag—or throw it out only if it’s decloaked—to protect the freedom of American investors.