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An Open Letter To Advisors From the Chairman of the ASA

Every financial advisor in the country needs to be aware of a serious client privacy issue developing with the Securities and Exchange Commission.

By Ronald J. Kruszewski

Chairman of the American Securities Association and the Chairman and CEO of Stifel Financial Corp.

Every financial advisor in the country needs to be aware of a serious client privacy issue developing with the Securities and Exchange Commission. The issue is the intention of the SEC to collect your client’s full name, year of birth, address, and account type, along with your client’s portfolio holdings and record of transactions into one giant government database.

This is bad policy. My position, and the position of the American Securities Association (ASA), an organization dedicated to advocating the trust of clients, which I am proud to chair, is clear. There cannot be any reasonable cost/benefit analysis which justifies the risk of collecting this personal information in a national database.

The collection of your client’s private information is being justified via the establishment of the Consolidated Audit Trail. The CAT is designed to collect and accurately identify every order, cancellation, modification, and trade execution for all exchange-listed equities and options across all U.S. markets. The ASA supports the establishment of the CAT. But make no mistake, the collection of individual client private information is not needed to fulfill the regulatory mandate of the CAT. The ASA has sued the SEC on this single issue: the collection of individual investor personal and financial information into a national database.

We are concerned about the privacy implications for customers if the CAT collects individual investor personal information and we also believe it’s not a matter of if, but when, the CAT will be compromised by bad actors. We have been told that this database and the individual investor personal information it stores will be secure, encrypted, and impervious to hacking by the bad actors in our cyber communities. We strongly disagree.

So why does the SEC want to collect personal client data in the first place? As I understand it, the primary justification is to detect trading based on non-public information. If you take a step back, it is not difficult to understand why. Insider trading is a crime. It is theft from investors, and it undermines the free and fair markets that make the United States the center of the financial world. Today, more than ever, technology allows for mass surveillance.

Yet, just because mass surveillance is now within easy reach, it doesn’t mean we should allow our most sensitive data to be gathered in one place. We believe the true costs of such a program should be weighed more carefully – not less. Americans have always had a fundamental right to privacy and security from government overreach. After all, most of the Bill of Rights is dedicated to preventing law enforcement from taking the simplest path. Our culture and our courts have consistently upheld this balance as times have changed.

In a rush to take advantage of new ways to monitor for crime, collection of personal, private data in the CAT surveillance program sidesteps that balance altogether. The risks to our privacy and security, as individuals and as a nation, are coming into focus. The benefits, relative to the current enforcement regime and all the alternative ways to improve it, are not. We did not want to sue our regulator. But, as a trade association whose mission is to promote investor trust and confidence, we have an obligation to protect their privacy rights.

Again, my position is clear. If government prosecutors want to search your home, they need a search warrant. The same should apply to your investment accounts. SEC Commissioner Peirce was even more direct in her objecting to the CAT, as you can read here.

The ASA launched, a nationwide grassroots movement to give a voice to every American who is as concerned about this as we are. We encourage you and your clients to join the fight and help us to stop the collection of their personal information before it causes innocent individuals and families to become victims of hacking, identity theft, and data manipulation. Help us tell Washington politicians and the SEC, enough is enough. Protect our data privacy.

This open letter originally appeared at ADVISORHUB.

ASA’s regional financial services companies work in communities across the country to create jobs, grow the economy, and increase prosperity for all Americans. The ASA exclusively represents the capital market and private client interests of its members and seeks to promote free market principles making it easier to access financial advice and capital. ASA members help Americans save for retirement, provide Main Street businesses with capital to grow, and advise hardworking Americans how to create and preserve wealth. For the latest updates follow @AmerSecurities and learn more at


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