SEC Sued by NCLA Over Alleged Unconstitutional Investor Surveillance

The New Civil Liberties Alliance (NCLA) has taken legal action against the Securities and Exchange Commission (SEC) claiming the agency is unconstitutionally monitoring investors by gathering extensive financial data without proper authorization. Filed last Tuesday in the U.S. District Court for the Western District of Texas the lawsuit targets the SEC’s Consolidated Audit Trail (CAT) program which records detailed information on every trade executed in U.S. markets.

NCLA attorney Peggy Little argued the SEC “arrogates surveillance powers and appropriates billions of dollars without a shred of Congressional authority — all while putting Americans’ savings and investments at grave and perpetual risk” by seizing all financial data from all Americans who trade in the American exchanges.

An SEC spokesperson responded to these claims stating “The Commission undertakes its regulatory responsibilities consistent with its authorities.”

The lawsuit describes CAT as “the greatest government mandated mass collection of personal financial data in United States history.” It also claims the SEC alongside other self-regulatory organizations (SROs) imposes multibillion-dollar costs on American investors through fees that ultimately fund the CAT.

Former Attorney General William Barr recently criticized the CAT program in an op-ed suggesting such sweeping data collection efforts should face rigorous constitutional scrutiny. “But the whole point of the Fourth Amendment is to make the government less efficient by making it jump through hoops when it seeks to delve into private affairs” Barr wrote.

Things are different today, and technology can be leveraged by governments to amass an incredible amount of data at a low cost in effort and with low impact on budgets, meaning that very serious privacy concerns are raised by these kinds of activities being authorized without the expressed will of U.S. voters.

Many experts say that the CAT collection of investors’ trade data pushes the boundaries of government power beyond its constitutional limits, arguing that it violates the Fourth Amendment and that legislation needs to be enacted for such activities and not allow Americans to be spied on unilaterally by a regulatory agency.

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