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Wall Street's regulatory chief says data collection plan on hold

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(Reuters) — A controversial proposal by Wall Street’s industry-funded regulator to collect massive amounts of customer account data will not proceed until the industry’s concerns are addressed, the regulator’s chief executive will tell lawmakers Friday.

“To be clear, we will not move ahead with the present form of the proposal and will not move forward with an amended version until we conclude that the concerns ... have been addressed,” Financial Industry Regulatory Authority CEO Richard Ketchum said in prepared testimony seen by Reuters.

Mr. Ketchum could face some tough questions from Republicans on a House of Representatives financial services panel over FINRA’s plan, known as “Comprehensive Automated Risk Data System,” or CARDS for short.

The CARDS plan would require brokerages to provide FINRA with vast quantities of data from individual U.S. brokerage accounts to help the regulator better analyze trading activity, asset movements and other areas of surveillance.

The plan was first floated in 2012, but has faced stiff opposition.

The industry has said it is overly broad, burdensome and costly.

In addition, many have complained that it could become a ripe target for hackers seeking to steal the identities of investors.

FINRA has said it would not collect customers’ personal details such as Social Security numbers, but some say it could still be possible for sophisticated cyber criminals to piece the information together and trace it back to individual identities.

The plans’ critics have included Securities and Exchange Commission Republican member Michael Piwowar, who is one of five SEC commissioners who would cast a vote before any final CARDS program could be approved.

Mr. Ketchum plans to say Friday that FINRA understands the concerns about privacy and potential bad actors trying to hack the system.

He said FINRA is conducting “additional analyses,” engaging third-party experts and exploring alternative approaches.

He added that FINRA is also reviewing “the feasibility of meeting the important goal of enhancing our early warning capabilities regarding fraud and investor abuse using existing data sources.”

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