Republican lawmakers and the American Securities Association (ASA) say the Securities and Exchange Commission (SEC) is violating the Fourth Amendment by putting together a list that contains the private information of investors.

The Consolidated Audit Trail (CAT) database was originally proposed by the SEC in 2010 to help regulators track order and trading activity throughout U.S. markets for listed equities and options. According to the ASA, the database will list all the financial holdings and personal information of investors, including their name, phone, address, brokerage accounts, birthdate and Social Security numbers.

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While the CAT list was adopted in 2012, the ASA filed a lawsuit against the SEC in May 2020 to protect retail investors from identity theft and safeguard their right to privacy by stopping the collection of their personally identifiable information.

In July 2022, the SEC released an order that granted temporary relief from certain requirements of the CAT, delaying its full implementation until 2024. In the interim, the SEC is requesting the information be given voluntarily, with expected forced implementation by next year’s deadline, according to the ASA. 

The SEC declined to comment on the matter.

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Meanwhile, Louisiana Republican Sen. John Kennedy told FOX Business, "The CAT would expose every American investor’s personal data to malicious hackers in the states and abroad."

"Not only does the CAT create one big centralized target for bad actors, it can’t promise to protect anyone’s data effectively," he continued. "Cyberattacks from the Chinese Communist Party and other thugs have already hurt Americans by targeting federal agencies."

In June 2023, the ASA told the exchange commission that the biggest cyberthreat facing American investors is not the lack of standardization regarding broker-dealer customer notification policies or insufficient public disclosure regarding major cyber events, but rather, it's the vast collection and storage of investors' financial and personal information in an unsecured, centralized database in Washington that will become "the target" for cybercriminals and hackers from Russia and China who wish to inflict economic harm on the U.S.

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"Collecting and storing personal data in the CAT serves no regulatory purpose, and it’s unconstitutional," Kennedy said.

"Since the SEC seems set on ignoring the Fourth Amendment, I’m planning to introduce a bill that would stop the SEC from requiring brokers to give investors’ personal information to the CAT," he added. "My bill would also require the SEC to delete any personally identifiable information that it may collect as part of a specific investigation as soon as that issue is resolved – so bureaucrats couldn’t build a perennial database that exposes investors’ private information."

The ASA said cybersecurity should be a top priority for financial institutions, as evidenced by a major breach at the Consumer Financial Protection Bureau in March. The association also pointed to the Russian cyberhack of the Treasury and Commerce departments, along with numerous other agencies in 2020.

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Chris Iacovella, CEO of ASA, said, "Bureaucrats are known for overreach, and a new Republican bill will protect the American people from this invasion of privacy."

"The ASA has even launched a website called mydatamyvote.com and will continue to spread awareness so investors can fight back," he went on. "Democrats think the SEC needs this information to stop insider trading, which is untrue, as the commission brings an average of 100 cases per year under the current system."

"Additionally, some Democrats strongly support a surveillance state," Iacovella added. 

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Alongside Kennedy, Republicans Barry Loudermilk, Steve Womack, French Hill, Bill Huizenga, Ann Wagner and Jerry Moran are supporting the ASA's efforts.

"I’m hopeful that all of my colleagues will realize that building this database makes their constituents vulnerable to fraud, identity theft and other crimes," Kennedy said.

"Sometimes, Big Brother has bad ideas with worse consequences," he continued. "CAT is a bad idea that could cause incredible harm to hardworking people, and I don’t think Americans on either side of the aisle want to see their elected representatives help the SEC make it easier for hackers to steal their personal data."