A bill recently introduced in the U.S House of Representatives would force mutual fund complexes and other financial services companies to improve the security of sensitive financial consumer data, and perhaps even require them to provide free data monitoring to investors whose information has been breached.
The Financial Data Protection Act of 2005 seeks to prevent data breaches by mandating a strong national standard for the protection of sensitive consumer information. It would require institutions to notify consumers if their information has been compromised and could be used by identity thieves and, upon notification of a breach, require institutions to provide consumers with a free six-month nationwide credit monitoring service.
The bill has received the endorsement of the Investment Company Institute in Washington because, among other things, a national standard would eliminate the disparate treatment of consumers based upon their state of residence.
The bill comes on the heels of several high-profile security breaches earlier this year at some of the nation's most well-known financial services firms. It also arrives at a time when mutual funds are wrestling with a solution for exchanging sensitive investor information with their intermediaries as it relates to trading activity, a measure imposed by Securities and Exchange Commission rule 22(c)-2.
"This legislation is right for consumers and right for the countless businesses that so often deal with sensitive financial data," said Rep. Steven C. LaTourette, R-Ohio, one of the bill's sponsors.