‘Surveillance State’: Bill Would Tackle Government Collection of Investor Data

Republicans in Congress are pushing back on what some consider another front on the surveillance state–in this case Security and Exchange Commission collection of investors’ personal data. 

Rep. Barry Loudermilk, R-Ga., is the lead sponsor of the Protecting Investors’ Personally Identifiable Information Act, which would restrict the SEC’s automatic collection of investors’ personal identifiable information, with a goal to eliminate the potential for breaches.

“We’ve had extreme government overreach from the SEC,” Loudermilk, a member of the House Financial Services Committee, told The Daily Signal. “The agency has violated the 4th and 5th Amendments. Any stock transfer from a Robinhood account has to go to this brokerage report.” 

Robinhood is a commission-free electronic trading company. 

The SEC established the Consolidated Audit Trail, or CAT, in 2021, designed to track order and trade activity in U.S. markets. The audit trail is a joint project of the securities exchanges and the Financial Industry Regulatory Authority.

The audit trail links specific transactions to individuals using information like their full name, address, and date of birth. The audit program is not funded through Congress and not subject to congressional oversight, Loudermilk said. 

He recalled his surprise when President Joe Biden’s SEC Chairman Gary Gensler said data is broadly collected to monitor for oddities.

“If a sheriff went by a local bank to say he wanted to peruse all bank customer records just to see if something unusual pops up, the bank president would tell him to get a warrant,” Loudermilk said. 

The SEC estimated in 2019 about 3,000 individuals would have access to the CAT. Loudermilk’s office said that’s more than the Consumer Financial Protection Bureau with about 1,600 employees. Further, Loudermilk contends that adversarial state actors such as China could benefit from having access to each individual investor’s entire market history. 

Neither the SEC nor FINRA immediately responded to inquiries for this story. 

Gensler addressed the program during House testimony in September 2023, saying, “It’s only allowed to be used, this Consolidated Audit Trail, at the SEC and the self regulator organization.”  

At that hearing, Loudermilk asked if the audit trail can be used for enforcement purposes. Gensler replied, “We have already. We anticipate we will in the future.”

Loudermilk responded: “You’re saying the Consolidated Audit Trail is a comprehensive database of transactions used for federal enforcement purposes but it is not subject to congressional oversight or through appropriations. This is shaping up to be another surveillance program without any restraint.”

Rep. Ann Wagner, R-Mo., is another House sponsor of the bill. 

Sen. John Kennedy introduced a Senate version. 

“Americans assume their private information is secure when they invest money in the U.S. stock market,” Kennedy said in a public statement. “However, the SEC’s unlawful Consolidated Audit Trail could put their data in jeopardy. My bill would protect American investors from foreign enemies and bad actors by preventing the SEC from collecting personal information it doesn’t need and storing it on a dangerous database.”

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