{"id":2222071,"date":"2024-04-16T08:13:02","date_gmt":"2024-04-16T12:13:02","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/lawsuit-seeks-to-stop-the-secs-decade-long-assault-on-your-investment-data-and-basic-rights\/"},"modified":"2024-04-16T08:16:32","modified_gmt":"2024-04-16T12:16:32","slug":"lawsuit-seeks-to-stop-the-secs-decade-long-assault-on-your-investment-data-and-basic-rights","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/lawsuit-seeks-to-stop-the-secs-decade-long-assault-on-your-investment-data-and-basic-rights\/","title":{"rendered":"Legal Action Aims to Halt SEC&#8217;s Decade-Long Attack on Investment Data and Rights"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">26<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Flawsuit-seeks-to-stop-the-secs-decade-long-assault-on-your-investment-data-and-basic-rights%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=2222071&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p>A <a href=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/groups-ask-doj-to-send-monitors-to-watch-arizona-election-audit\/\" title=\"Groups Ask DOJ to Send Monitors to Watch Arizona Election Audit\">recent lawsuit filed<\/a> in a Texas federal court challenges the Securities and Exchange Commission&#8217;s Consolidated \u200bAudit\u2064 Trail (CAT) program, which mandates the collection\u200d of data on all U.S. securities transactions. The lawsuit argues that CAT violates constitutional rights,\u2064 privacy,\u200b and regulatory boundaries. Concerns over excessive data \u200bcollection and potential misuse by the SEC\u2062 have raised alarms within the investment \u200dcommunity.  <\/p>\n<p class=\"readmore\">\n    <button onclick=\"showReadMore()\" id=\"readmorebtn\">Read more&#8230;<\/button>\n<\/p>\n<hr id=\"line\">\n<span id=\"more\"><\/p>\n<p><?xml encoding=\"utf-8\" ?><?xml encoding=\"utf-8\" ?><?xml encoding=\"utf-8\" ?><\/p>\n<div class=\"article-content\">\n<p>The Securities and Exchange Commission unconstitutionally mandated the seizure of data of every purchase or sale of securities in the U.S. markets, a lawsuit filed Tuesday in a Texas federal court alleged. <\/p>\n<p>The lawsuit, <em>Davidson v. SEC<\/em>, challenges the Consolidated Audit Trail, or CAT, which the SEC has been quietly working to implement for over a decade. Here\u2019s what you need to know about CAT and the lawsuit.<\/p>\n<div class=\"fdrlst__b89e9-paragraph-2-long d-flex justify-content-center\" style=\"margin-left: auto; margin-right: auto; text-align: center; \" id=\"fdrlst__b89e9-949134982\">\n<div id=\"div-gpt-ad-1379703300879-0\" class=\"mb-30\"><\/div>\n<\/div>\n<div class=\"fdrlst__b89e9-90f0dd349fee5c83a94ffee28b65e691 fdrlst__b89e9-paragraph-2\" id=\"fdrlst__b89e9-90f0dd349fee5c83a94ffee28b65e691\"><\/div>\n<h2 class=\"wp-block-heading\">Decade in the Works <\/h2>\n<p>CAT\u2019s origins date back to 2010 and the Obama administration. That year, under the guise of preventing another \u201cflash crash,\u201d in which market indices dropped some 15 percent before quickly rebounding, the SEC first promulgated Rule 613. That rule directed the creation of CAT, a database that, as the SEC <a href=\"https:\/\/www.sec.gov\/news\/press-release\/2012-2012-134htm\" target=\"_blank\" rel=\"noreferrer noopener\">explained<\/a> in a press release, would track \u201cevery order, cancellation, modification and trade execution for all exchange-listed equities and equity options across all U.S. markets.\u201d<\/p>\n<p>Rather than create the desired database itself, however, the SEC, by regulation, mandated that various \u201cself-regulated organizations\u201d (SRO), namely the Financial Industry Regulatory Authority\u00a0(FINRA) and a dozen or so national securities exchanges, create CAT. Rule 613 specified the parameters for CAT and required the collection of data sufficient to identify the individuals conducting the trades, the dates and times of any orders placed, any material terms of the order, and details concerning the broker proceeding with the order. <\/p>\n<p>Under CAT, the SEC will have access to the data to conduct later searches at will. It isn\u2019t merely the SEC with access to the data either \u2014 an estimated 3,000 people, including private individuals working for the exchanges, will likewise have access to CAT.<\/p>\n<h2 class=\"wp-block-heading\">A Private Army of Taxing Agents <\/h2>\n<p>In 2010, the SEC estimated it would cost $4 billion to implement Rule 613 and an additional $2.1 billion in annual costs to maintain CAT. The SEC, whose <a href=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/retail-theft-delivers-an-economic-blow-for-companies-and-communities\/\" title=\"Retail theft hurts businesses and communities economically.\">entire annual budget<\/a> for fiscal year 2010 totaled only $1.1 billion, didn\u2019t finance its CAT mandate, however. <\/p>\n<div class=\"fdrlst__b89e9-21eb27781f80f97224d45081e5352ff2 fdrlst__b89e9-paragraph-6\" id=\"fdrlst__b89e9-21eb27781f80f97224d45081e5352ff2\"><\/div>\n<p>Instead, the SEC required the SROs, such as FINRA, to cover the cost of CAT, with the various exchanges passing the cost on to brokers or dealers and, in turn, to investors. Further, the costs passed on to Americans are already far exceeding the <a href=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/biden-administration-doubling-down-on-costly-bullet-train-to-nowhere\/\" title=\"Biden Administration Doubling Down On Costly Bullet Train To Nowhere\">initial cost estimates<\/a>, with costs projected to be some five times higher than originally forecast.<\/p>\n<h2 class=\"wp-block-heading\">SEC Starts Collecting Americans\u2019 Financial Information <\/h2>\n<p>In June 2020, some 10 years after the SEC first proposed CAT, it began requiring broker-dealers to submit retail investors\u2019 information to \u201cthe CAT Central Depository.\u201d The required reporting was at first limited to national market systems and over-the-counter equity securities but later expanded to include data related to options. By December 2021, all FINRA members, including small broker-dealers, were required to report data from these categories. Then, in July 2022, the SEC delayed full implementation of CAT until 2024.<\/p>\n<p>With CAT on the cusp of full implementation, two Texas investors, Erik Davidson and John Restivo, joined by the National Center for Public Policy Research, which invests in U.S. securities, filed suit on Tuesday, in a Waco federal district court. The plaintiffs seek certification of the case as a class-action lawsuit and challenge Rule 613 on multiple fronts. <\/p>\n<h2 class=\"wp-block-heading\">Vesting Clause and Power of the Purse<\/h2>\n<p>The plaintiffs\u2019 complaint first alleges the SEC exceeded its authority in promulgating Rule 613, with count one alleging a violation of the vesting clause of Article I of the Constitution. The vesting clause provides that \u201c[a]ll legislative Powers\u201d are vested \u201cin the Congress.\u201d <\/p>\n<div class=\"fdrlst__b89e9-2fd2707db0d1c64a82883405aeff7cc0 fdrlst__b89e9-paragraph-10\" id=\"fdrlst__b89e9-2fd2707db0d1c64a82883405aeff7cc0\"><\/div>\n<p>Here, the plaintiffs maintain that \u201c[t]he CAT scheme represents an emerging and disturbing pattern whereby federal agencies unconstitutionally regulate matters clearly outside the scope of their statutory authority.\u201d In short, because Congress never authorized the SEC to adopt CAT, and because the Constitution holds \u201cthe lawmaking function belongs to Congress,\u201d count one of the complaint argues Rule 613 is unconstitutional.<\/p>\n<p>Count two further alleges the SEC violated the Constitution\u2019s vesting of the power of the purse in Congress. \u201cExecutive agencies may spend funds on a program only if they can convince Congress to appropriate the money,\u201d the plaintiffs allege, stressing that \u201c[t]his applies not only to the direct use of funds raised by the government or through SEC\u2019s self-appropriation through FINRA.\u201d <\/p>\n<p>\u201cBluntly put,\u201d the complaint continues, \u201cNo agency has the power to direct the seizing of Americans\u2019 private financial records or to fund this unlegislated and unfunded project by requiring regulated SROs to raise revenues for the project.\u201d<\/p>\n<h2 class=\"wp-block-heading\">First, Fourth, and Fifth Amendments <\/h2>\n<p>In counts three, four, and five, the complaint alleges violations of the Fourth, Fifth, and First Amendments respectively. Specifically, count three alleges the SEC\u2019s adoption of CAT violates the Fourth Amendment, which protects against unreasonable searches and seizures. The data collected consists of private papers in electronic form and personal effects, and Rule 613 mandates such collection without cause. This scheme, the complaint alleges, represents an unconstitutional seizure of the data. And when that data is later mined by the SEC, the government executes an unconstitutional search.<\/p>\n<p>Here, the complaint highlights the difference between CAT and the SEC\u2019s historical practices. While the SEC could long obtain information about securities transactions via subpoena and a \u201cblue sheet\u201d process, both procedures require the SEC to have an articulable basis to investigate a possible violation of securities laws. The SEC can then only obtain data related to those trades where there is an individualized suspicion of wrongdoing. <\/p>\n<p>The complaint does not challenge the blue sheet or subpoena process, arguing instead that the wholesale collection \u2014 without any suspicion \u2014 of the trading data of every American constitutes an unreasonable seizure under the Fourth Amendment. Later searches of that data further violate the Fourth Amendment\u2019s prohibition on unreasonable searches, the plaintiffs allege.<\/p>\n<p>The next count alleges CAT violates the Fifth Amendment by depriving plaintiffs of their \u201cpersonal information and business records\u201d and \u201cprivate papers and records\u201d without due process. Additionally, CAT violates the First Amendment, the plaintiffs allege, arguing that the SEC unconstitutionally requires plaintiffs to disclose the companies with which they seek to associate through securities purchases and further requires the disclosure of organizations to whom they seek to donate stock. <\/p>\n<p>The First Amendment protects freedom of association, including the right to keep private those organizations. Rule 613 requires plaintiffs and every American trading on U.S. exchanges to inform the government of the entities with whom they seek to associate, in violation of the First Amendment.<\/p>\n<h2 class=\"wp-block-heading\">Additional Counts <\/h2>\n<p>The legal challenge to CAT adds two more claims under the Administrative Procedure Act, one alleging the SEC exceeded its constitutional authority and the second alleging the SEC acted beyond its legislative authority. Plaintiffs also include a count under the Mandamus Act, 28 U.S.C. \u00a7 1361, seeking an injunction directing the SEC to abrogate all rules related to CAT. <\/p>\n<p>Finally, the complaint alleges one count against defendant CAT LLC \u2014 the corporate entity created by FINRA and the other exchanges to hold ownership of the CAT database. Here, the plaintiffs allege an \u201cunjust enrichment count,\u201d asserting that \u201cCAT LLC has no legitimate claim to\u201d the data provided it, and therefore, CAT LLC should be ordered to expunge all data from CAT. <\/p>\n<h2 class=\"wp-block-heading\">Constitution Doesn\u2019t Care If CAT Is Too Big to Fail<\/h2>\n<p>Administrative overreach is nothing new. However, today\u2019s lawsuit in <em>Davidson v. SEC<\/em> exposes a new extreme and multifaceted disregard for the Constitution by the administrative state. <\/p>\n<p>It isn\u2019t merely that the SEC regulated beyond its authority. The SEC also considered itself able to privately raise revenues to further its <em>ultra vires<\/em> goal of implementing CAT, ignoring the commands of the Fourth, Fifth, and First Amendments in the process. So while a court may pause at the thought of dismantling the billion-dollar-plus CAT scheme that has been in the making for over a decade, the Constitution should quickly overcome any such hesitation. <\/p>\n<p><em>Margot Cleveland is Of Counsel for NCLA. <\/em><\/p>\n<div class=\"fdrlst__b89e9-0e0070f0bd07a6142cb4ae28f1596876 fdrlst__b89e9-after-post-content\" id=\"fdrlst__b89e9-0e0070f0bd07a6142cb4ae28f1596876\"><\/div>\n<hr class=\"wp-block-separator\">    \t\t\t\t\t   \t\t\t\t\t\t\t\t\t<\/div>\n<p><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A recent lawsuit in a Texas federal court, Davidson v. SEC, challenges the SEC&#8217;s implementation of the Consolidated Audit Trail (CAT), alleging it unconstitutionally mandates the seizure of all U.S. securities transaction data. This legal action aims to halt the SEC&#8217;s invasive data collection practices, sparking concerns over privacy and regulatory overreach<\/p>\n","protected":false},"author":499,"featured_media":2222072,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"https:\/\/thefederalist.com\/wp-content\/uploads\/2024\/04\/Screenshot-2024-04-16-at-7.01.01%E2%80%AFAM-1024x684.png","fifu_image_alt":"","footnotes":""},"categories":[546],"tags":[],"class_list":["post-2222071","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-the-federalist"],"fifu_image_url":"https:\/\/thefederalist.com\/wp-content\/uploads\/2024\/04\/Screenshot-2024-04-16-at-7.01.01%E2%80%AFAM-1024x684.png","_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/2222071","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/499"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=2222071"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/2222071\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/2222072"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=2222071"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=2222071"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=2222071"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}