© 2020 Arizent. All rights reserved.

SIFMA Gears Up for Regulatory Battles

Register now

NEW YORK -- The industry's leading lobbying group is gearing up for several key regulatory battles.

SIFMA leaders singled out FINRA's proposed Comprehensive Automated Risk Data System, otherwise known as CARDS, and the Department of Labor's proposed fiduciary standard as potential threats to the industry and investors.

Ken Bentsen, president and CEO of SIFMA, said at a press conference that CARDS, a proposed data aggregation system, would be too costly to build and maintain, invade investor privacy and be vulnerable to hacker attacks.

"There's a broad-based opposition to this approach, in trying to collect all investor data to be held in a quasi-government center – and our members feel it's an invasion of privacy," he said. "It's effectively a sledge hammer approach to what FINRA has identified as a small set of problems."


SIFMA leaders said firms are concerned that, having collected vast amounts of personal information about investors' allocation decisions, FINRA would not be able to safeguard it.

Ira Hammerman, general counsel at SIFMA, highlighted recent high-profile hacker attacks: "There isn't a day that goes by, it seems, where you do not read some story about hacking. To have it all in one place where cyber criminals can attack it does not make sense."

Earlier this week, SIFMA filed a comment letter with FINRA on the proposed system. In the letter, SIFMA said that a study it commissioned revealed that it would cost $680 million to build, and an additional $360 million to maintain annually.

At the press conference, however, SIFMA leaders returned again and again to concerns around privacy.

"What makes CARDS unique is the level of account level detail. It's not just transactional. It's literally the cash flows into and out of your account. That's what makes it unique. Given what's going on in the world, there is a heightened level of concern," said Randy Snook, executive vice president for policies & practices at SIFMA.


SIFMA executives said that the industry group was collaborating with regulators on several key initiatives, such as cyber security, which Bentsen said was "an area where we see continued risks and continued attacks."

He added, "We put out a month ago our principles of cyber regulation. We're trying to work with our regulators, and across the board, we're not just talking the SEC or FINRA, but all of them in concert."

Bentsen also said the industry anticipates that an SEC proposed, new fiduciary standard will be forthcoming soon.

"This is something that SIFMA and its members have strongly supported," he said.


However, areas of disagreement persist. Bill Johnstone, CEO of D.A. Davidson Companies and chair of the board of directors of SIFMA, said that there are concerns that the cost of some regulatory proposals could weigh more heavily on smaller brokerage firms than the larger wirehouses.

Johnstone said that the level of complaints at small firms often gets overlooked: "I think that at our firm, and we're not unique, we get a handful of complaints. When I say a handful, we mean it."

He continued: "I think that in the conversations we have had about regulation, how well and how effective the industry works is often left out. I've been in the industry 45 years, and the quality of advice is much better than it's ever been. The industry works quite well and quite effectively and there is a tremendous amount of choice for investors. I think that needs to be understood."

Read more:

For reprint and licensing requests for this article, click here.