Conservative think tank hits SEC with consumer privacy lawsuit over market surveillance tool

SEC lawsuit overview: 

• Who: The National Center for Public Policy Research filed a class action lawsuit against the U.S. Securities and Exchange Commission, SEC chairman Gary Gensler and Consolidated Audit Trail LLC. 
• Why: The self-described conservative think tank claims the agency’s market surveillance tool, the Consolidated Audit Trail, is unlawful and puts the privacy of more than 100 million Americans at risk. 
• Where: The think tank class action lawsuit was filed in Texas federal court. 

Self-described conservative think tank group the National Center for Public Policy Research filed a consumer privacy class action lawsuit against the U.S. Securities and Exchange Commission (SEC) this month in an effort to end the use of a market surveillance tool.

The group claims the SEC’s market surveillance tool, known as the Consolidated Audit Trail (CAT), puts consumers in danger of having their data exposed during a potential data breach and that the SEC lacked the congressional authority to set up the system. 

“The CAT database is especially vulnerable because a large number of users, spread across more than twenty different organizations — governmental and private — have, and will have access to it,” the SEC class action states. 

The CAT was created by the SEC in 2010 and “forces brokers, exchanges, clearing agencies, and alternative trading systems (ATS) to capture data on every investor’s trades, from inception to completion,” according to the lawsuit. 

Thousands of individuals have access to data stored in SEC CAT database, think tank class action claims

The National Center for Public Policy Research argues thousands of individuals have access to the data stored in the CAT — which the group claims is the largest database of securities ever created — and that no one is allowed to opt out of the “forced disclosure.” 

“Brokers cannot opt out, and neither can Americans executing their own trades, unless they stop trading in U.S. markets,” the SEC class action says. 

The group wants to represent a nationwide class of more than 100 million individuals whose personally identifiable information or securities transaction information is stored within the CAT database. 

The class action lawsuit brings claims against the SEC and its chairman Gary Gensler under the U.S. Constitution, the First Amendment and the Administrative Procedure Act, 

The group is asking for declaratory and injunctive relief along with relief under the Mandamus Act. 

In other recent news involving the SEC, the agency approved 11 exchange-traded products holding bitcoin in January after determining the issuers showed they had implemented sufficient safeguards to prevent fraud and manipulation. 

Is your personal data stored in the SEC’s CAT database? Let us know in the comments.

The plaintiffs are represented by Mark Siegmund of Cherry Johnson Siegmund James LLC and Margaret Little, Andrew Morris and Margot Cleveland of the New Civil Liberties Alliance.

The SEC class action lawsuit is Davidson, et al. v. Gensler, et al., Case No. 6:24-cv-00197, in the U.S. District Court for the Western District of Texas.

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