The Securities and Exchange Commission is sitting on “the world’s largest collection of retail investor financial information ever assembled,” and it’s using that data to monitor trillions of your securities transactions without a warrant.
The surveillance program, called the Consolidated Audit Trail (CAT), has been operating for several years with virtually no public scrutiny. The SEC maintains a massive government database containing details about Americans’ investment decisions, which it searches at will. No congressional authorization. No appropriated funds. Just bureaucrats tracking which companies everyday investors choose to support with their hard-earned money.
Now a lawsuit from the New Civil Liberties Alliance is challenging the program as both illegal and unconstitutional, arguing it violates the Fourth Amendment’s protections against warrantless searches. But perhaps more troubling for Americans who value their freedom is the First Amendment problem the SEC seems content to ignore.
The Constitution forbids the government from forcing citizens to disclose the groups or organizations they support. That principle has been affirmed repeatedly by the Supreme Court.
In NAACP v. Alabama (1958), the Court struck down Alabama’s attempt to force the civil rights organization to hand over its membership list. The justices explained that “the inviolability of privacy in group association may in many circumstances be indispensable to preservation of freedom of association.”
More recently, in Americans for Prosperity v. Bonta (2021), the Supreme Court ruled California couldn’t require non-profits to disclose their donor lists. Forced disclosure of an entity’s supporters, the Court held, creates a risk of limiting expression “in violation of the First Amendment.”
Even SEC Commissioner Hester Peirce has sounded the alarm. She warned the agency could use CAT data “to stalk personal or political enemies.” Given the “expressive value” of various trading decisions, Peirce noted, “untargeted surveillance of financial transactions raises the same types of civil liberty concerns as other mass surveillance programs.”
The potential for government abuse isn’t theoretical. It’s the very reason the Supreme Court has protected associational privacy for decades.
Consider the difference in scale. In the NAACP case and the Americans for Prosperity case, the government sought information about one organization and its supporters. The SEC’s program is exponentially more invasive. It forces all investors to disclose countless associations across every security they trade.
Congress never gave the SEC permission to build this surveillance apparatus. Lawmakers never set aside taxpayer money to fund it. Yet the program continues to operate, vacuuming up data on the financial decisions of ordinary Americans who’ve done nothing wrong.
For years, regulators and courts have looked the other way when constitutional violations occur in the name of financial regulation. The New Civil Liberties Alliance argues it doesn’t have to be this way. Courts have the authority to shut down the surveillance. The SEC itself could end the program.
