The New Civil Liberties Alliance (NCLA) has filed a lawsuit against the Securities and Exchange Commission (SEC) alleging that the agency is illegally collecting personally identifiable data through its “Consolidated Audit Trail” (CAT) program. The CAT program requires brokers, exchanges, clearing agencies, and alternative trading systems to send detailed information on every investor’s trades in U.S. markets to a centralized database without authorization from Congress and in violation of the Fourth Amendment. The NCLA claims that the CAT program, which was conceived during the Obama administration, is a multibillion-dollar fund that puts Americans’ financial data at risk.
The NCLA argues that the SEC’s collection of financial data from all Americans trading in U.S. exchanges gives the agency surveillance powers and appropriates billions of dollars without Congressional authority. Peggy Little, NCLA senior litigation counsel, stated that the Founders provided protections in the Constitution to prevent such autocratic and dangerous actions, and called for the CAT program to be removed completely. The lawsuit filed in the district court for the Western District of Texas describes the CAT program as the greatest government-mandated collection of personal financial data in U.S. history, enabling mass tracking of individuals’ financial activities with powerful computer algorithms.
The lawsuit challenges the SEC’s “dystopian surveillance” and violation of the Fourth Amendment by collecting data on investors’ trades from inception to completion in its database, including funds such as 401(k) or 529 Education Fund. The SEC collects fees from brokerage houses, which are passed on to investors, to fund the CAT program. Little pointed out that there is no law permitting the SEC to collect and store such data, and that American investors are unknowingly paying for this program through fees imposed by self-regulatory organizations. The SEC spokesperson stated that the Commission carries out its regulatory responsibilities within its authorities, despite the lawsuit challenging the legality of the CAT program.
Former Attorney General William Barr criticized the SEC’s CAT program in an op-ed for The Wall Street Journal, arguing that the government should not have carte blanche access to citizens’ information without following proper procedures outlined in the Fourth Amendment. Barr noted that the SEC’s argument for the CAT program’s efficiency goes against the Fourth Amendment’s aim of requiring the government to go through proper channels for investigations. By arguing for easier access to investor information without following procedures, Barr believes the SEC is effectively asserting it should be exempt from the protections provided by the Fourth Amendment.
Overall, the lawsuit filed by the NCLA against the SEC alleges that the CAT program is unconstitutional for collecting mass amounts of personal financial data without authorization and violating the Fourth Amendment. The program has raised concerns about surveillance and privacy violations, with critics arguing that the SEC’s actions are an overreach of authority and place Americans’ financial data at risk. The legal challenge to the program highlights the importance of protecting individuals’ privacy rights and ensuring that government agencies adhere to legal and constitutional boundaries when collecting and using personal data.
