FINRA Wants All of Your Information

We received an email today from Paul Meehl, CEO of Sprott Global Resource Investments Ltd. about proposed rule changes in the Financial Industry Regulatory Authority (FINRA), Wall Street’s self-regulation body. The changes proposed will drastically broaden the information collected on individual brokerage accounts, potentially exposing your personal financial information to greater scrutiny. We’ve bolded a few key points. Read on below.

Dear Friends,

Many you may have already seen FINRA Notice 13-42, a request for comment on a proposed new system that would provide for automated and regular collection of data by FINRA on essentially all US brokerage accounts. The data would include customer, transaction, and security holdings information. FINRA’s stated purpose is to “advance its supervision of firms and their associated persons” in the name of customer protection.

It strikes me as an unusual time for a regulatory body to be proposing such a massive increase in the collection of our customers account information and activity, and I’m concerned by the lack of discussion of this proposal anywhere outside the FINRA communication channels. My purpose in sending this email is to, at a minimum, generate some additional awareness both within and outside the broker-dealer community so that FINRA has an opportunity to hear from both industry and the public before the proposal is made part of the regulations.

Among my concerns related to this proposal are:

– With the ongoing revelations about NSA surveillance and the associated public outcry, is this an appropriate time for the securities industry to inform the investing public that we are now going to be reporting ALL of their account, transactional, and asset holding information into a large regulatory database? While I don’t necessarily doubt that FINRA’s intent is to better protect the investing public, I am not convinced that the investing public will be so understanding.

– How will we assure clients that their names and other identifying information will not be collected? Can FINRA assure us that it will not be?

– What was the impetus for this new proposal? Has there been a public demand for increased regulatory surveillance of their activity in order to more easily identify potentially violative activity, or has FINRA determined, on its own, that this is necessary?

– FINRA describes costs as being divided between clearing and introducing firms – do they recognize that clearing firm costs are eventually passed on, either directly or indirectly, to the introducing firms, and that, in turn these costs must eventually be passed on the investing public?

– Do they believe the investing public is willing to accept higher costs and a more intrusive regimen of information collection from their securities accounts in order to be more “protected”? Does FINRA plan on focus groups or other methods to see if this is what investors want?

– Would the investing public prefer more severe punishment (e.g. lifetime bans and larger fines) for egregious and repeat offenders to an expansion of the gathering of private client information?

If you share my concerns about this proposal, I hope you will consider submitting comment to FINRA (email address is on the Notice) and sharing this information with others, whether investors or other broker-dealers. It seems likely that this initiative is going to move forward in one form or another, so the more input we provide, and the more public discussion there is about it, the less offensive the final implementation is likely to be.

Thank you very much for your time and consideration. I wish you all a happy, healthy, and prosperous 2014.


Paul Meehl

CEO – Sprott Global Resource Investments Ltd.

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