Last Updated on June 12, 2017 by John Fischer

The financial and security industries all over the country have reacted with a mixture of surprise, displeasure and genuine concern to the proposed Comprehensive Automated Risk Data System (CARDS), which was proposed in 2014 by the Financial Industry Regulatory Authority, Inc. (FINRA).

FINRA cards has often been seen as the lapdog of the financial firms that make up its core, they have been accused of slow processes, ineffectual policies and general incompetence when it comes to dealing with financial indiscretions within the country’s financial industry. However, after the financial crisis hit the country, it has been working on ways to more effectively identify and stop potential risks and fraud schemes from going ahead unseen.

What Is CARDS?

FINRA CARDS is an electronic regulatory system that will require the constant gathering of information and data on balances and deals made in brokerage accounts. It is a system designed to accumulate massive amounts of information with regards to investors and the transactions that they have with their broker firms.

What Is CARDS’ Purpose?

The purpose of CARDS is to allow FINRA to have greater resources and collections of data from the financial industry. This will enable FINRA to constantly go over information that is coming in: it should allow them to identify patterns of trader and sales unlawfulness and malpractice.

The system proposes to offer a greater level of protection for investors, by enabling the company to identify potential red flags within the system, before the problem occurs. FINRA will be able to identify patterns of high risk brokers, branches and firms, who are not being as careful with their investors’ money as they should be.

How Will It Work?

FINRA is made up of thousands of security firms, and CARDS will require these firms to record, collect, store and submit information gathered from hundreds of millions of different brokerage accounts throughout the country.

The CARDS system will allow FINRA to run constant comprehensive checks and they will be able to run analytics quickly and in advance. The system will enable FINRA to move away from the practice of dealing with malpractice well after the incident has occurred. Because CARDS should help identify potential problems before they occur, FINRA claims that the system will assist with a significant reduction in broker deceit and malpractice within the industry.

The Benefits of CARDS

At the moment FINRA relies on data analysis and field examiners who try and piece together the jigsaw pieces that may constitute to a deal going wrong. This a time consuming and laborious process that often leads to FINRA only finding out about financial misconduct once the deal has already gone sour. CARDS would allow data to be constantly scoured, and will be more successful at picking up clues when there is a pattern of a certain brokerages taking advantage of their clients. Thus it will allow FINRA to better protect investors from fraudulent deals.

The sense that there is also a ‘watchdog’ looking into all the information that is supplied may be enough to put some brokers off any potential wrongdoing.


The risks involved in the CARDS system mainly stems from a security point of view. Many people feel like CARDS will be a high-risk project as there will be so much investment information kept in one single database. With recent hacking of high-level security institutions, this will remain a concern, despite FINRA’s insistence of the extremely small chance of a security breach.

The cost of the project is also a point of concern, as firms will need to develop programs and technology that can correctly deal with all the information needed by FINRA for CARDS.

How Will CARDS Affect Brokers?

Brokers will have to collect and standardize huge amounts of data, and this could be a costly and time-consuming undertaking.

Firms will also have to be less risky with investors’ money, as any unusual activity will likely set off a red flag in the CARDS system.

How Will Finra CARDS Affect Investors?

Investors will receive a much higher guarantee of protection from FINRA, as they will hopefully be able to identify any sketchy or high-risk activity before any real damage is done to the investor. That being said, a database filled with investors’ details could be a target for a major hacking scheme, and this could put the investors’ personal details at risk.

Since the program was first proposed there has been a number of changes in rules and regulations, and FINRA cards is still listening to concerns and feedback. Pilot rollout was planned for early 2015 but this has been indefinitely delayed. But once a final proposed has been submitted and approved by SEC, the first phase of CARDS would be implemented 5 months after the approval, and the second phase is planned to come into action 15 months after the approved SEC proposal.