FINRA Folds Its CARDS Until Industry Concerns Addressed

hands shuffling cards casinoOn Friday, May 1, Financial Industry Regulatory Authority (FINRA) CEO Rick Ketchum testified at a Congressional hearing that FINRA is halting any work on its Comprehensive Automated Risk Data System (CARDS) unless they are able to address industry concerns around the potential ability of “a few bad actors” to access information that could possibly be engineered to identify individuals. Ketchum said FINRA will be conducting additional analyses, and engaging third-party experts to further explore these threats and identify alternative approaches.

When FINRA first proposed the possibility of expanding CARDS, some industry experts criticized the system as a costly, redundant and overreaching regulatory tool. Others said FINRA firms are overreacting and the system will enable FINRA to detect abusive activities before they happen. Ketchum explained, “We are also reviewing the feasibility of meeting the important goal of enhancing our early warning capabilities regarding fraud and investor abuse using existing data sources and the data that will become available when the Consolidated Audit Trail is implemented. To be clear, we will not move ahead with the present form of the proposal and will not move forward with an amended version until we conclude that the concerns raised in the comments have been addressed.”

For more information on industry opinions about CARDS, see Oyster Consulting Senior Consultant Evan Rosser’s comments in Investor News article, “FINRA Expected to Adopt CARDS Despite Vocal Industry Resistance.”