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Investor Protection

Violating the Privacy of Your ‘Consumer Financial Information’

June 27, 2020

by Howard Haykin



I get it. You pay bills online, you trade stocks online, you get bank and brokerage e-statements, you shop online. So why would you care if your registered rep (or broker) shared your confidential records with a 3rd-party vendor when he or she moved to Kestra Investment Services, LLC? Because your consumer rights might have been violated.



Regulation S-P (Privacy of Consumer Financial Information and Safeguarding Information) generally prohibits financial institutions from disclosing “nonpublic personal information” about a customer unless the customer receives proper notice and an opportunity to opt out. Information is considered to be “nonpublic personal information” if it contains personally identifiable financial information about one or more consumers,



In recent years, registered reps who agreed to join Kestra Investment Services, a broker-dealer, were instructed to take nonpublic personal customer information from their current firms and disclose it to a 3rd-party vendor. The vendor used a template spreadsheet to collect that customer information, including … (i) social security numbers; (ii) driver’s license numbers; (iii) birth dates; (iv) annual incomes; and, (v) net worth.


Once collected, the information was automatically posted to New Account forms, which the vendor sent to customers who agreed to open Kestra accounts. Kestra was hit with a $125,000 fine for its violative conduct. It's uncertain if any or all of the 68 registered reps who worked with the 3rd-party vendor were similarly fined or sanctioned.



INVESTOR TAKE-AWAYS.    Investors should know their rights and choose to work only with brokers who protect those rights.



[For further details, click on … FINRA Case #2018060228201.]