Richard Ketchum

Richard Ketchum

FINRA Eases CARDS Data Submission For Firms

FINRA plans to allow firms to bypass clearing firms, send data directly to regulator

FINRA announced changes on Monday to its planned Comprehensive Automated Risk Data System (CARDS). FINRA Chairman and CEO Richard Ketchum told attendees at its annual conference that the regulator planned to ease up on how firms will be able to submit data. 

Under the revised format, firms will be able to send trading data directly to FINRA, rather than rely on a clearing firm as originally proposed—a major concern raised in the over 800 comment letters submitted. FINRA has plans to roll out a new, formal proposal, featuring substantial changes, as early as this summer.

“So I'm pleased to announce that we are changing the CARDS proposal so you can choose how to send us the data. You can send it to us through a clearing firm, you can send it to us through a service bureau or you can send it to us directly. It's up to you. It's not exactly Burger King's 'Have It Your Way,' but you will definitely have choices,” Ketchum said Monday. 

Since its unveiling in December, broker/dealers, industry groups and individual advisors have been critical of the draft 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.

Ketchum noted the regulator is taking firms’ concerns seriously, saying FINRA has been “aggressively”  meeting with firms to talk through the costs and benefits of CARDS. Through feedback gained in these meetings, FINRA is planning to launch CARDS in stages.

FINRA will provide firms with a standardized file specification for transmitting data, Ketchum said. The regulator also plans to permit variability in the format of data related to suitability. “This stems from comments that introducing firms, in particular, use different terminology with respect to information about their customers,” he said. 

Ketchum also addressed firms’ concerns about the security of such a large database. “We believe the security risk is very low—and dispute that CARDS could create systemic risk. Given that we will not be collecting personally identifiable information, the chance that anyone could exploit what is, in effect, anonymous data for nefarious purposes is very small,” he said. 

FINRA is also looking closely at the cost and operational concerns firm have raised. But Ketchum urged firms to look at the issue more broadly and in the context of investor protection. “While I understand where many commenters' concerns are coming from, they seem to me to be a tad one-sided,” Ketchum said. "We are convinced that CARDS will revolutionize securities regulation and help us drive out activities that harm investors.” 

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