The Securities and Exchange Commission illegally tracks Americans who invest in the stock market, the lawsuit alleges

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By Fox News

The Securities and Exchange Commission (SEC) is collecting data on every citizen who invests in the stock market illegally, according to a new lawsuit.

The New Civil Liberties Alliance (NCLA) filed a lawsuit Tuesday against the SEC alleging that the agency, through its “Consolidated Audit Trail” or “CAT” program, is collecting large amounts of personally identifiable data by coercing broker-dealers, exchanges, clearing agencies and systems. Alternative Trading captures and sends detailed information on all investor trades in US markets to a central database.

NCLA says the agency is doing so without authorization from Congress and in violation of the Fourth Amendment, which prohibits unreasonable government searches and seizures of private information.

The CAT program, which was designed during the Obama administration with bipartisan support within the commission, is a multibillion-dollar self-contained fund, backed by various fees collected by the SEC through investment transactions, NCLA says. The group calls it “completely illegal” and says it puts Americans' financial data at “serious risk.”

“By seizing all financial data from all Americans who trade on U.S. exchanges, the SEC is arrogating its surveillance powers and seizing billions of dollars without any authority from Congress — all while putting Americans’ savings and investments at serious and lasting risk,” Peggy Little said. , NCLA's Senior Litigation Counsel.

“The Founders provided strong protections in our Constitution to prevent these tyrannical and dangerous acts. This cat must be uprooted by its roots and branches,” she said.

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

“Historically, a government that wished to track its citizens had to devote significant resources to pursuing them. This is no longer the case: modern surveillance tools enable mass tracking of every individual movement, every transaction, and every purchase, sale, or transfer of securities at low cost, while Powerful computer algorithms can process that information to reveal the personal and private details of each person's financial life or investment strategy.

“This class action complaint challenges the SEC’s shocking arrogation of power to impose wanton surveillance, unsuspecting seizures, and real or potential searches on millions of American investors.”

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

“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 American investors are going to pay for this because it's paid for by fees charged by SROs. [self-regulatory organizations] Excerpt from brokerage firms, which charge fees to their clients… I mean, this is a multi-billion dollar tax on American investors and American investment, 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 authority.”

In an editorial published Monday in wall Street Journal, Former Attorney General William Barr said that “even when the government seeks information about a citizen from banks, phone companies and others with whom he has done business, Government is not free To empty this carte blanche.

The core of the SEC's argument for the CAT program is that it “can investigate matters more easily if it is not limited to collecting investor information on a case-by-case basis after suspected wrongdoing,” Barr noted.

“But the whole point of the Fourth Amendment is to make government less efficient by making it jump through hoops when it seeks to delve into private affairs,” Barr wrote.

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