NCLA Unleashes Lawsuit to Take Down SEC’s Illegal Mass Data Collection Machine
April 16 2024 - 11:23AM
Today, the New Civil Liberties Alliance launched a Complaint
against the Securities and Exchange Commission (SEC) challenging
the agency’s unconstitutional “Consolidated Audit Trail.” The CAT
is the largest government-mandated mass collection of personal
financial data in American history. Without any statutory
authority, SEC is forcing brokers, exchanges, clearing agencies and
alternative trading systems to capture and send detailed
information on every investor’s trades in U.S. markets to a
centralized database, which SEC and private regulators can access
forever. NCLA is asking the U.S. District Court for the Western
District of Texas to stop this unlawful, unprecedented seizure and
mass surveillance scheme in its tracks.
Like thousands of other Americans, NCLA clients
Erik Davidson, John Restivo and the National Center for Public
Policy Research expected the government to respect their
constitutional rights. Running roughshod over that sacred trust,
SEC has seized their data in violation of Article I of the
Constitution, the Fourth Amendment, the Fifth Amendment, and the
First Amendment’s freedom of association and expression. SEC’s
ultra vires action also violates the Administrative Procedure Act.
NCLA is pleased to have the assistance of the Cherry Johnson
Siegmund James PLLC firm in filing this lawsuit.
The CAT database would reportedly be the largest
securities database ever created, and the most massive government
database of any kind outside the National Security Agency (NSA),
putting every American’s financial data and security at grave and
needless risk from cybersecurity breaches. Amassing all such data
in a single government database exponentially increases the
likelihood and scope of a dire security breach imperiling the
financial security of all Americans.
Congress never authorized SEC to set up such a
data collection and surveillance system. By doing so anyway, SEC
seizes legislative power, clearly violating Article I of the
Constitution, which vests Congress with all lawmaking authority.
SEC funds its CAT scheme by unilaterally taking billions of dollars
from self-regulatory organizations like the Financial Industry
Regulatory Authority and other self-regulatory organizations
(SROs). This self-appropriation of billions of dollars constitutes
taxation without representation and brazenly ignores the
Constitution and statutes that reserve tax and appropriations
powers to Congress alone. Agencies have no power to fund new
programs by raising billions from self-regulatory organizations
under their regulatory thumb.
SEC Commissioner Hester Peirce has called the
CAT system “a dangerous dog,” pointing out that Americans would
never tolerate government organizations partnered with private
firms to collect complete information on everything they buy or
give government a “direct feed” of movements from their cars’ GPS
systems. Yet the CAT proposes to do just that by commandeering SROs
and thereby forcing all investors to turn over to the government
the far more valuable—and vulnerable—set of information about their
investments and retirement savings.
NCLA released the following
statements:
“SEC’s CAT has no precedent in history. By
seizing all financial data from all Americans who trade in the
American exchanges, 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. The Founders provided rock-solid
protections in our Constitution to prevent just these autocratic
and dangerous actions. This CAT must be ripped out, root and
branch.”— Peggy Little, Senior Litigation Counsel, NCLA
“To create the Consolidated Audit Trail, the SEC
has mowed down venerable constitutional safeguards that shield
citizens’ private information from the government. This new
database tracks investments made by more than 100 million private
citizens who have done nothing wrong—citizens who want to invest
to buy a house, pay for their children’s education, or save for
retirement. It’s no surprise that Congress never authorized any of
this. In this lawsuit, we ask the Court to put a stop to
it.”— Andrew Morris, Senior Litigation Counsel,
NCLA
“The CAT is just the latest example of an agency
run amok, claiming power to do something that Congress never
bestowed. The Major Questions Doctrine was tailor-made to take down
unauthorized agency actions like this.”— Mark Chenoweth,
President, NCLA
For more information visit the case page
here.
ABOUT NCLA
NCLA is a nonpartisan, nonprofit civil rights
group founded by prominent legal scholar Philip Hamburger to
protect constitutional freedoms from violations by the
Administrative State. NCLA’s public-interest litigation and other
pro bono advocacy strive to tame the unlawful power of state and
federal agencies and to foster a new civil liberties movement that
will help restore Americans’ fundamental rights.
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Ruslan Moldovanov
New Civil Liberties Alliance
202-869-5237
ruslan.moldovanov@ncla.legal