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Davidson, Restivo, National Center for Public Policy Research v. Gensler

NCLA challenges the Securities and Exchange Commission’s unconstitutional “Consolidated Audit Trail” (CAT), the largest government-mandated mass collection of personal financial data in American history. 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 the agency and private regulators can access forever.

Like thousands of other Americans, Erik Davidson, John Restivo, and the National Center for Public Policy Research naturally expected their government to respect their constitutional rights. Running roughshod over that sacred trust, SEC’s CAT system has seized their data, taking this property without due process of law in violation of Article I of the Constitution, the Fourth and Fifth Amendments, and the First Amendment freedom of association and expression. This ultra vires action also violates the Administrative Procedure Act. The CAT database would reportedly be the largest securities database ever created, and the most massive government database of any kind outside the NSA, putting every American’s financial data and security at grave and needless risk from cybersecurity breaches.

Congress never passed a statute giving SEC authority to set up such a data collection and surveillance system. In doing so on its own authority, SEC wields legislative power, clearly violating the clause in Article I of the Constitution vesting 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 (FINRA) 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 for Congress alone. Agencies have no power to fund legally unauthorized programs by raising the billions from self-regulatory organizations under their regulatory thumb.

Margaret A. Little
Senior Litigation Counsel
Andrew Morris
Senior Litigation Counsel
Margot Cleveland
Of Counsel

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