U.S. securities regulators are proposing to introduce a new account data collection system in an effort to help automate the process of sniffing out problematic sales practices.
The Financial Industry Regulatory Authority (FINRA) issued a regulatory notice today proposing the introduction of account reporting requirements that would allow it to collect account information (on a standardized, automated basis) along with account activity and security identification information, from both self-clearing firms and firms that clear trades on behalf of introducing firms.
FINRA says that, initially, the so-called Comprehensive Automated Risk Data System (CARDS) program will increase its ability to “protect the investing public by utilizing automated analytics on brokerage data to identify problematic sales practice activity.”
It also says that it plans to analyze CARDS data before examining firms, which would allow it to identify risks earlier, and to shift work away from the on-site exam process.
“The information collected through CARDS will allow FINRA to run analytics that identify potential “red flags” of sales practice misconduct and help us identify potential business conduct problems with firms, branches and registered representatives,” said Susan Axelrod, FINRA’s executive vice president of regulatory operations.
The self-regulatory organization is soliciting comment on what it’s calling “an innovative proposal” without specifics, in order to get input on the appropriate design of CARDS and related costs.