Industry regulator FINRA pulled back from its proposal to collect and retain sensitive client information as part of a planned compliance system, according to a notice published Tuesday.
“FINRA has concluded that the Comprehensive Automated Risk Data System (CARDS) proposal will not require the submission of information that would identify to FINRA the individual account owner, particularly, account name, account address or tax identification number,” the agency said in a statement  posted Tuesday.
While the regulator is still pushing forward with its plan to collect customer trading data, FINRA will not require information that could be used to identify a specific client. Under the original proposal , FINRA planned to collect client account information from firms, using the data to analyze firms’ for problematic activity, including excessive commissions, price gouging, pump-and-dump schemes and account churning. The proposal also noted that the collected information would be used in broker-dealer exams as well.
Since its unveiling in December, broker-dealers, industry groups and individual advisors have been critical of the proposal, questioning how FINRA would the collected client account data, the security of such information and the costs of creating and maintaining such a system.
“I have my doubts. I believe both Broker Dealers, Clearing Firms, and FINRA are going to need to make large cash investments much like the insurance companies have done to match up with ObamaCare specifications just to have the system collapse under the financial strain and inability to get system integration,” wrote Oakbridge Financial Services in February.
Industry group FSI welcomed FINRA’s decision to steer clear of collecting sensitive, personally identifying information. “While we still have concerns with data security, costs and other unintended consequences of the proposal, we applaud FINRA’s response to industry concerns,” FSI President & CEO Dale Brown said in a statement.
In light of the decision to limit the personalized data collected, FINRA has extended the comment period from Feb. 21 to March 21, 2014.