Via Regulatory Notice 14-37, FINRA is seeking comment on a revamped proposal to implement the Comprehensive Automated Risk Data System (CARDS) system, which would require firms to submit certain comprehensive trade data and account data to FINRA on a regular basis.
As FINRA indicates, if this proposal is approved, firms would face costs in setting up and maintaining systems to comply with the CARDS proposal. One of my preliminary concerns is that the implementation of that system may then lead to firms facing additional costs in responding to regulatory requests for information (or defending unnecessary examinations and inquiries) based upon data analyzed by regulators.
In addition to the costs of adopting technology systems necessary to comply with these reporting requirements, firms will also incur costs in revamping written supervisory systems to comply with the reporting and supervision requirements, and then in carrying out the continued reporting requirements. Further, we expect that even if clearing firms would handle certain reporting for fully-disclosed introducing firms, some of these costs may be passed on to the introducing firm (either immediately or at contract renewal time) because of the increased costs being incurred by the clearing firm.
My sense is that it is likely that FINRA will approve a proposal to adopt the CARDS system and seek SEC approval to adopt the related rules and begin implementation of CARDS. But how that system looks can possibly be influenced by comments from the industry in response to this request for comment. Firm executives may wish to review this notice with key area leaders including operations, technology, compliance and legal, and then consider submitting comments to FINRA in response to the request for comment. FINRA will be receiving comments until December 1, 2014, according to Regulatory Notice 14-37.