FINRA CARDS Proposal: FSI Submits Comment Letter

March 20, 2014

Today, the Financial Services Institute (FSI) submitted to FINRA our comment letter regarding its Comprehensive Automated Risk Data System (CARDS) concept proposal.

FSI’s comments included the following key points:

  • The future collection of direct business data will introduce significant costs and challenges, impacting the affordability of financial advice.
    • The data from direct business, where the client and the advisor deal directly with the product sponsor – rather than through a clearing firm – will not be captured in the CARDS data. By not collecting direct business data, FINRA will be excluding a large percentage of the sales practice information necessary for it to have a complete picture of a specific firm or client. This may cause additional and unnecessary information requests as FINRA analyzes CARDS data. In order for FINRA to have complete picture, it would need to require firms to collect, standardize and submit direct data, which would significantly impact the cost-effectiveness of direct business and, ultimately, access to affordable financial advice.
  • The exclusion of sensitive personally identifiable information (PII) does not alleviate all data security and data privacy concerns.
    • On March 4, FINRA announced they will not collect sensitive, personally identifying information from the data they plan to receive through CARDS. However, FSI remains concerned with the data security issues introduced by CARDS. While FINRA will not see PII from CARDS data, the data will still be consolidated at the clearing firm level. By doing this, the concerns surrounding data security of consolidated financial data still remain, but have shifted from FINRA to the clearing firms.
  • CARDS will have serious data standardization, data quality and data translation challenges.
    • FINRA will experience significant challenges in standardizing data collected through CARDS and ensuring data quality. FINRA would need to spend significant resources to create new systems and organizational units devoted to obtaining the raw data, standardizing it and translating it to develop consolidated account information for customers and firms. Firms and industry vendors have made numerous unsuccessful attempts to create common data standards and forms due to the wide array of different form fields and information collected by different firms. Recently, firms experienced the costs involved with adding only a few new data fields to their systems to comply with FINRA’s new suitability rule, FINRA Rule 2111. Many firms incurred costs in the millions of dollars to comply with the new requirements.

To read the full comment letter, click here.

FSI looks forward to continuing our constructive working relationship with FINRA as it reviews all the comments on the proposal.