A new lawsuit has been filed against the Securities and Exchange Commission (SEC) by the New Civil Liberties Alliance (NCLA), accusing the agency of illegally collecting data from every citizen who invests in the stock market. The lawsuit claims that through its 'Consolidated Audit Trail' (CAT) program, the SEC is gathering vast amounts of personally identifiable information by mandating brokers, exchanges, clearing agencies, and alternative trading systems to provide detailed data on every investor's trades in U.S. markets to a centralized database.
The NCLA argues that the SEC is conducting these activities without proper authorization from Congress and in violation of the Fourth Amendment, which protects against unreasonable government search and seizure of private information. The CAT program, initiated during the Obama administration with bipartisan support, is funded by fees collected by the SEC through investment transactions, making it a multibillion-dollar initiative according to NCLA.
The lawsuit, filed in the district court for the Western District of Texas, describes CAT as 'the greatest government-mandated mass collection of personal financial data in United States history.' It raises concerns about the potential misuse of modern surveillance tools that can track individuals' financial activities at a low cost, posing risks to Americans' financial data and investments.
NCLA's senior litigation counsel highlighted that the SEC is storing information on all investors' trades, including those involving funds like 401(k) or 529 Education Fund, without legal authority. The lawsuit emphasizes that the Fourth Amendment prohibits such broad data collection without specific cause or suspicion of wrongdoing.
Former Attorney General William Barr weighed in on the issue, emphasizing the importance of upholding Fourth Amendment protections against unwarranted government intrusion into private affairs. Barr criticized the SEC's argument that the CAT program streamlines investigations, stating that bypassing constitutional safeguards undermines individual privacy rights.
While the SEC maintains that it operates within its regulatory mandate, the lawsuit underscores the potential implications of unchecked data collection on American investors. The legal challenge seeks to address what critics view as an overreach by the SEC in amassing personal financial information without proper oversight or legal basis.
