House Panel OKs Bill Barring Personal Info From Trading Database

Stay up-to-date with the latest developments in securities law through access to both news and all statutes and regulations. Find relevant corporate filings through a searchable EDGAR database. And...

By Andrew Ramonas

Legislation that would prohibit a new stock trade database from collecting personally identifiable information was approved by the House Financial Services Committee Jan. 18.

The American Customer Information Protection Act (H.R. 4785), sponsored by Rep. Bill Huizenga (R-Mich.), is intended to keep data like Social Security numbers, individuals’ names, and their dates of birth out of the massive market-surveillance system, known as the Consolidated Audit Trail. The CAT, however, still could accept personal information that applies to large traders under the measure. The database is intended to help the SEC better investigate illegal trading and market disruption causes in the wake of the 2010 Flash Crash, which roiled financial markets.

Panel members voted 31-25 to report the bill to the full House for consideration. The Senate doesn’t have similar legislation.

The Securities and Exchange Commission directed U.S. stock and options exchanges to start feeding the CAT trading details in November 2017. Broker-dealers have until November 2018 to comply. Exchanges and brokers lobbied unsuccessfully for delaying the system last year amid growing cybersecurity concerns surrounding the Equifax Inc. hack and the breach of corporate filings in the SEC’s Edgar database.

“Some have indicated that the CAT system will be the second largest single database in the world, with only the National Security Agency’s being larger,” Huizenga said during the committee’s meeting to consider his legislation and other bills. “This is why the importance of the cybersecurity cannot be overstated. The ability of the SEC to safeguard nonpublic financial information and other highly sensitive data is paramount because it instills the confidence in the markets.”

An SEC spokesman declined to comment.

‘Reckless Bill’

SEC Chairman Jay Clayton said in November that protecting the CAT’s data is of “paramount importance.” Commission staff is evaluating what personal information the agency may need, he said.

“I have made it clear that the SEC will not retrieve sensitive information from the CAT unless we believe appropriate protections are in place,” Clayton said in a statement at the time.

Democrats and advocacy group Consumer Federation of America opposed the bill. The legislation would “undermine” the SEC’s market surveillance efforts, CFA director of investor protection Barbara Roper and financial services counsel Micah Hauptman wrote in a Jan. 16 letter to the committee.

“The bill would reduce regulators’ ability to immediately identify bad actors to only a tiny fraction of the millions of traders whose conduct the CAT is intended to monitor,” Rep. Maxine Waters of California, the committee’s top Democrat, said at the panel’s meeting. “H.R. 4785 is a reckless bill that would cripple an important and long-overdue regulatory tool.”

To contact the reporter on this story: Andrew Ramonas in Washington at

To contact the editor responsible for this story: Seth Stern at

For More Information

American Customer Information Protection Act (H.R. 4785):

Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Securities & Capital Markets on Bloomberg Law