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SEC Approves New Identity Theft Rules

broker compliance nycMary Jo White was sworn in on April 10 and her first official act as head of the SEC was to approve rules requiring brokers-dealers and investment advisers and other entities regulated by it to adopt programs to detect red flags and prevent identity theft.

The SEC adopted the new identity theft requirements jointly with the Commodity Futures Trading Commission (CFTC). The rules were mandated by the Dodd-Frank Act, which amended the Fair Credit Reporting Act (FCRA) to add the CFTC and SEC to the list of federal agencies that must jointly adopt and individually enforce identity theft red flags rules.

Under the Final Rule, brokers and advisers are given flexibility in determining which red flags are relevant to their businesses and the covered accounts they manage over time. However, the SEC stated that new identity theft red flags programs should include policies and procedures designed to:

  • Identify flags
  • Detect the occurrence of those red flags
  • Respond appropriately
  • Provide for periodic updates

“These rules are a common-sense response to the growing threat of identity theft to all Americans who invest, save, or borrow money,” White said in a press statement.

The final rules will become effective 30 days after publication in the Federal Register, and the compliance date will be six months after the effective date.

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