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SEC faces new lawsuit alleging 'mass surveillance' of Americans through stock market data

SEC faces new lawsuit alleging 'mass surveillance' of Americans through stock market data

 


The Securities and Exchange Commission (SEC) illegally collects the data of every citizen who invests in the stock marketaccording to a new lawsuit.

The New Civil Liberties Alliance (NCLA) filed suit Tuesday against the SEC, claiming that the agency, through its “Consolidated Audit Trail” or “CAT” program, collects massive amounts of personally identifiable data by forcing brokers, stock exchanges, compensations. alternative trading agencies and systems to capture and send detailed information about each investor trading in U.S. markets to a centralized database.

The agency is doing so, according to NCLA, without congressional authorization and in violation of the Fourth Amendment, which prohibits unreasonable government searches and seizures of private information.

Conceived during the Obama administration with bipartisan support on the Commission, the CAT program is a multibillion-dollar self-appropriated fund, fueled by various fees that the SEC collected through investment transactions, says the NCLA. The group calls it “completely illegal” and says it puts Americans' financial data at “grave risk.”

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SEC Headquarters

The Securities and Exchange Commission seal is affixed to a wall at the SEC headquarters in Washington, DC, June 19, 2015. (AP Photo/Andrew Harnik, file)

“By seizing all the financial data of all Americans who trade on U.S. stock exchanges, the SEC assumes surveillance powers and appropriates billions of dollars without any authority from Congress, while putting savings and investments Americans in grave and perpetual danger,” said Peggy Little, NCLA. lead litigation attorney.

“The Founders built ironclad protections into our Constitution to prevent these autocratic and dangerous actions. This CAT must be pulled out, root and branch,” she said.

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Pedestrians walk past the New York Stock Exchange

Pedestrians walk past the New York Stock Exchange in the Manhattan borough of New York on May 5, 2022. (AP Photo/John Minchillo, file)

The lawsuit, filed in the U.S. District Court for the Western District of Texas, calls CAT “the largest government-mandated mass collection of personal financial data in U.S. history.”

“Historically, a government that wanted to track its citizens had to devote significant resources to tracking them. This is no longer the case: modern surveillance tools make it possible to mass track individuals for every movement, every transaction, every purchase, sale or transfer of securities at low cost while powerful computer algorithms can process this information to reveal personal and private details about each person's financial life or investment strategy,” the lawsuit states.

“This class action complaint challenges the shocking arrogance of the SEC’s power to impose dystopian surveillance, suspicionless seizures, and actual or potential searches on millions of American investors.”

Little told Fox News Digital that the SEC collects and stores in its database “all of the trading information on every investor, from start to finish,” citing funds like 401(k) or 529 Education Fund as examples.

“And there is simply no law that allows them to do that, and the Fourth Amendment prohibits them from doing that,” she said.

“And here's the dirty little truth: All US investors will pay for this because it's paid for by the fees that SROs [self-regulatory organizations] taken from the brokerages, who charge their clients, I mean, this is a multi-billion dollar tax on American investors and American investments, and no one ever voted for it.

An SEC spokesperson told Fox News Digital that “the Commission carries out its regulatory responsibilities consistent with its authorities.”

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SEC Headquarters

The headquarters of the Securities and Exchange Commission is seen in Washington, DC on January 27, 2023. (Graeme Sloan/Bloomberg via Getty Images)

In an editorial published Monday in The Wall Street Journal, Former Attorney General William Barr argued that “even when the government seeks information about a citizen from banks, telephone companies, and others with which it has done business, the government is not free vacuuming with carte blanche.”

Barr noted that the essence of the SEC's argument for the CAT program is that “it could investigate more easily if it were not limited to collecting information on investors on a case-by-case basis after suspicions of wrongdoing.”

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“But the very purpose of the Fourth Amendment is to make government less effective by making it jump through hoops when it seeks to meddle in private affairs,” Barr wrote.

“For an agency to assert that it should be able to avoid these obstacles to facilitate investigations is to assert that it should be exempt from the Fourth Amendment.”

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