Case 6:24-cv-00197-ADA Document 76 Filed 08/30/24 Page 1 of 29
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF TEXAS
`
`
`
`Case No. 6:24-cv-197-ADA
`
`
`ERIK DAVIDSON, JOHN RESTIVO,
`and NATIONAL CENTER FOR
`PUBLIC POLICY RESEARCH,
`
`
`
`
`Plaintiffs,
`
`
`
`
`
`
`
`
`v.
`
`
`GARY GENSLER and U.S.
`SECURITIES AND EXCHANGE
`COMMISSION,
`
`
`Defendants.
`
`
`
`AMICUS BRIEF OF THE AMERICAN SECURITIES ASSOCIATION,
`ATTORNEY GENERAL WILLIAM BARR, AND THE AMERICAN FREE
`ENTERPRISE CHAMBER OF COMMERCE
`
`J. Michael Connolly
`Steven C. Begakis
`CONSOVOY MCCARTHY PLLC
`1600 Wilson Blvd., Suite 700
`Arlington, VA 22209
`(703) 243-9423
`mike@consovoymccarthy.com
`steven@consovoymccarthy.com
`
`Counsel for Amici Curiae
`
`
`
`
`
`
`
`
`
`CLERK, U.S. DISTRICT COURT
`WESTERN DISTRICT OF TEXAS
`
`BY: ________________________________
`
`FILED
`
`DEPUTY
`
`August 30, 2024
`
`CV
`
`

`

`Case 6:24-cv-00197-ADA Document 76 Filed 08/30/24 Page 2 of 29
`
`
`
`TABLE OF CONTENTS
`
`TABLE OF AUTHORITIES............................................................................................................... iii
`
`INTEREST OF AMICUS CURIAE ....................................................................................................1
`
`INTRODUCTION...................................................................................................................................2
`
`ARGUMENT .............................................................................................................................................4
`
`I.
`
`The legality of SEC’s collection of PII through the CAT is a major question. ...........4
`
`A. The CAT’s unprecedented collection of investors’ PII has vast political
`and economic significance. ............................................................................................4
`
`B. The SEC’s collection of PII through the CAT has been the subject of an
`earnest and profound debate across the country. .................................................. 14
`
`II. The SEC’s collection of PII violates the Fourth Amendment. .................................... 17
`
`CONCLUSION ...................................................................................................................................... 20
`
`
`
`
`
`
`
` ii
`
`

`

`Case 6:24-cv-00197-ADA Document 76 Filed 08/30/24 Page 3 of 29
`
`
`
`CASES
`
`TABLE OF AUTHORITIES
`
`Airbnb, Inc. v. City of N.Y.,
`373 F. Supp. 3d 467 (S.D.N.Y. 2019) ...................................................................................... 17, 19
`
`Ala. Ass’n of Realtors v. HHS,
`594 U.S. 758 (2021) ...............................................................................................................................3
`
`ASA v. SEC,
`No. 23-13396 (11th Cir.) ................................................................................................................. 1, 9
`
`Biden v. Nebraska,
`143 S. Ct. 2355 (2023) ..........................................................................................................................3
`
`Cal. Bankers Ass’n v. Shultz,
`416 U.S. 21 (1974) .................................................................................................................................7
`
`Carpenter v. United States,
`484 U.S. 19 (1987) .................................................................................................................................5
`
`Carpenter v. United States,
`585 U.S. 296 (2018) ................................................................................................................. 6, 17, 19
`
`CFPB v. Accrediting Council for Indep. Colls. & Schs.,
`854 F.3d 683 (D.C. Cir. 2017) ............................................................................................................8
`
`City of L.A., Calif. v. Patel,
`576 U.S. 409 (2015) ............................................................................................................... 17, 19, 20
`
`Gonzales v. Oregon,
`546 U.S. 243 (2006) ...............................................................................................................................3
`
`John Doe No. 1 v. Reed,
`561 U.S. 186 (2010) ...............................................................................................................................7
`
`NAACP v. Ala. ex rel. Patterson,
`357 U.S. 449 (1958) ...............................................................................................................................6
`
`NFIB v. OSHA,
`595 U.S. 109 (2022) ...............................................................................................................................3
`
`Reporters Comm. for Freedom of Press v. AT&T Co.,
`593 F.2d 1030 (D.C. Cir. 1978) ..........................................................................................................7
`
`See v. City of Seattle,
`387 U.S. 541 (1967) ............................................................................................................................ 18
`
`Sorrell v. IMS Health Inc.,
`564 U.S. 552 (2011) ...............................................................................................................................6
`
`Statharos v. N.Y.C. Taxi & Limo. Comm’n,
`198 F.3d 317 (2d Cir. 1999) .................................................................................................................7
`
` iii
`
`

`

`Case 6:24-cv-00197-ADA Document 76 Filed 08/30/24 Page 4 of 29
`
`
`
`Tinker v. Des Moines Indep. Cmty. Sch. Dist.,
`393 U.S. 503 (1969) ...............................................................................................................................5
`
`United States v. Jacobsen,
`466 U.S. 109 (1984) ............................................................................................................................ 17
`
`United States v. Jones,
`565 U.S. 400 (2012) ...............................................................................................................................5
`
`Util. Air Regul. Grp. v. EPA,
`573 U.S. 302 (2014) ...............................................................................................................................3
`
`W. Va. State Bd. of Educ. v. Barnette,
`319 U.S. 624 (1943) ...............................................................................................................................7
`
`West Virginia v. EPA,
`597 U.S. 697 (2022) ........................................................................................................................ 3, 17
`
`Whalen v. Roe,
`429 U.S. 589 (1977) ...............................................................................................................................7
`
`STATUTES
`
`15 U.S.C. §6803 ....................................................................................................................................... 18
`
`42 U.S.C. §1320d-6 ................................................................................................................................. 18
`
`REGULATIONS
`
`17 C.F.R. §242.613 ....................................................................................................................................4
`
`17 C.F.R. §248.30 .................................................................................................................................... 18
`
`Joint Industry Plan; Order Approving an Amendment to the National Market System Plan
`Governing the Consolidated Audit Trail; Notice, 88 Fed. Reg. 62628 (Sept. 12, 2023) ................. 17
`
`Joint Industry Plan; Order Approving the National Market System Plan Governing the
`Consolidated Audit Trail, 81 Fed. Reg. 84696 (Nov. 23, 2016) ......................................... 9, 10, 14
`
`OTHER AUTHORITIES
`
`ACLU, Letter to SEC (Dec. 16, 2019), bit.ly/2Nk9oh8 ................................................................ 16
`
`ASA, Comment on SEC Proposed Rulemaking (Nov. 30, 2020), bit.ly/2LFM5AM ............. 15
`
`ASA, Comment on SEC Proposed Rulemaking (Oct. 28, 2019), bit.ly/2Rg5k2V............. 15, 16
`
`ASA, Letter to SEC (Feb. 25, 2019), bit.ly/3iQ7e7A ..................................................................... 15
`
`ASA, Letter to SEC and CAT NMS Plan Participants (May 16, 2019), bit.ly/3egvJqR ......... 15
`
`Att’y Gen. William P. Barr, The Securities and Exchange Commission Is Watching You,
`The Wall Street Journal (Apr. 15, 2024), bit.ly/3Yvg2a7 ....................................................... 2, 20
`
`Austin Weinstein & Jamie Tarabay, SEC Had a Fraught Cyber Record Before X Account
`Was Hacked, Bloomberg Law (Jan. 12, 2024), bit.ly/3WUmBlp .............................................. 13
`
` iv
`
`

`

`Case 6:24-cv-00197-ADA Document 76 Filed 08/30/24 Page 5 of 29
`
`
`
`Bank Shares Slide on Report of Rampant Money Laundering, The Associated Press
`(Sep. 21, 2020), bit.ly/3ppBNEk .................................................................................................... 10
`
`Casey Bond, How Hackers Can Use Your Boarding Pass to Easily Steal Personal Information,
`HuffPost (Dec. 5, 2019), bit.ly/38HkYyy ..................................................................................... 11
`
`CAT NMS Plan, bit.ly/4caHuNy ...........................................................................................................4
`
`Chair Gary Gensler, Statement on CAT Funding (Sept. 6, 2023), bit.ly/46pLLeR ..........................5
`
`Chairman Jay Clayton, Statement on Status of the Consolidated Audit Trail (Nov. 14, 2017),
`bit.ly/3SUfRSf..................................................................................................................................... 17
`
`Chairman Jay Clayton, Statement on Status of the Consolidated Audit Trail (Sept. 9, 2019),
`bit.ly/2YZUfa ............................................................................................................................... 16, 17
`
`Chariman Mary L. Shapiro, Opening Statement at SEC Open Meeting: Consolidated Audit
`Trail (July 11, 2012), bit.ly/3yBoI40 ..................................................................................................5
`
`Comm’r Caroline A. Crenshaw, Statement Regarding the Order Approving an Amendment
`to the National Market System Plan Governing the Consolidated Audit Trail (Sept. 6, 2023),
`bit.ly/4cef98W .......................................................................................................................................8
`
`Comm’r Hester M. Peirce, Intellectual Siren Song (Sept. 18, 2020), bit.ly/3lT0wyN ......................8
`
`Comm’r Hester M. Peirce, Scarlet Letters: Remarks Before the American Enterprise Institute,
`(June 18, 2019), bit.ly/3pCbaMh .......................................................................................................6
`
`Comm’r Hester M. Peirce, Statement of Hester M. Peirce in Response to Release
`No. 34-88890; File No. S7-13-19 (May 15, 2020), bit.ly/3gUHeqp..................................... passim
`
`Comm’r Hester M. Peirce, Statement on the Order Granting Temporary Conditional
`Exemptive Relief from Certain Requirements of the National Market System Plan Governing
`the Consolidated Audit Trail (July 8, 2022), bit.ly/3ydnR9N ......................................................... 16
`
`Comm’r Hester M. Peirce, This CAT is a Dangerous Dog, RealClearPolicy
`(Oct. 9, 2019), bit.ly/3fTxTxE .................................................................................................... 9, 16
`
`CrowdStrike Global Threat Report Reveals Big Game Hunting, Telecommunication Targeting
`Take Center Stage for Cyber Adversaries, CrowdStrike (Mar. 23, 2020), bit.ly/32QLxhz .......... 11
`
`David E. Pozen, The Leaky Leviathan: Why the Government Condemns and Condones
`Unlawful Disclosures of Information, 127 Harv. L. Rev. 512 (2013) ............................................... 14
`
`Eric Geller, Pompeo Says China Hacked Marriott, Politico (Dec. 12, 2018),
`politi.co/3mF6eow............................................................................................................................. 13
`
`Front Running, Corporate Financial Institute, bit.ly/3ku91i1 ............................................................9
`
`H.R. 2039 (2021) ..................................................................................................................................... 15
`
`H.R. 4551 (2023) ..................................................................................................................................... 15
`
`H.R. 4785 (2018) ..................................................................................................................................... 15
`
` v
`
`

`

`Case 6:24-cv-00197-ADA Document 76 Filed 08/30/24 Page 6 of 29
`
`
`
`Implementation and Cybersecurity Protocols of the Consolidated Audit Trail, Hearing before
`the U.S. H.R. Comm. on Fin. Servs. (Nov. 30, 2017), bit.ly/2ZqAl8p ............................ 14, 15
`
`James Rundle & Anthony Malakian, CAT’s Tale: How Thesys, the SROs and the SEC
`Mishandled the Consolidated Audit Trail, WatersTechnology (Feb. 14, 2019),
`bit.ly/4ceSiu3 ....................................................................................................................................... 14
`
`Jane Croft, Citadel Securities Sues Rival Over Alleged Trading Strategy Leak, Financial
`Times (Jan. 10, 2020), on.ft.com/3nkbFZs .................................................................................. 10
`
`Judith Bellamy Peck, The Ninth Circuit’s Requirement of Notice to Targets of Third Party
`Subpoenas in SEC Investigations—A Remedy Without a Right, 59 Wash. L. Rev. 617 (1984) .......9
`
`Kevin Stankiewicz & Bob Pisani, Cybersecurity Threats to Corporate America Are Present
`Now ‘More Than Ever,’ SEC Chair Says, CNBC (Nov. 2, 2020), cnb.cx/36w6sqL ................ 12
`
`Khristopher J. Brooks, What Customers Should Know About AT&T’s Massive Data
`Breach, CBS News (Apr. 11, 2024), bit.ly/3AfYCUT .................................................................. 12
`
`Kim Zetter, Bradley Manning to Face All Charges in Court-Martial, Wired (Feb. 3, 2012),
`bit.ly/34Ft8VK ................................................................................................................................... 14
`
`Mike Thomas, 14 Risks and Dangers of Artificial Intelligence (AI), BuiltIn (Jul. 25, 2024),
`bit.ly/4dcsMqE ......................................................................................................................................8
`
`Natasha Bertrand & Eric Wolff, Nuclear Weapons Agency Breached Amid Massive Cyber
`Onslaught, Politico (Dec. 17, 2020), bit.ly/4cxdAmB .................................................................. 11
`
`Patricia Zengerle & Megan Cassella, Millions More Americans Hit by Government
`Personnel Data Hack, Reuters (July 9, 2015), reut.rs/3oLxV0b .................................................. 13
`
`Press Release, Seven International Cyber Defendants, Including “Apt41” Actors, Charged in
`Connection With Computer Intrusion Campaigns Against More Than 100 Victims Globally,
`U.S. Dep’t of Justice (Sept. 16, 2020), bit.ly/2HmrhMw........................................................... 12
`
`Press Release, Two Ukrainian Nationals Indicted in Computer Hacking and Securities Fraud
`Scheme Targeting U.S. Securities and Exchange Commission, U.S. Dep’t of Justice
`(Jan. 15, 2019), bit.ly/2J4SEvh ........................................................................................................ 13
`
`Sara Salinas, Facebook Stock Slides After FTC Launches Probe of Data Scandal, CNBC
`(Mar. 26, 2018), cnb.cx/38AOB4y ................................................................................................. 10
`
`Sen. John Kennedy, et al., Letter to SEC (July 24, 2019), bit.ly/2A1E5oi ................................. 15
`
`SIFMA, Senate Banking Committee Hearing on the CAT (Oct. 22, 2019), bit.ly/33hrSqM ..............4
`
`Sophie Alexander, Robinhood Internal Probe Finds Hackers Hit Almost 2,000 Accounts,
`Bloomberg Wealth (Oct. 15, 2020), bloom.bg/35Gy7oG ........................................................ 11
`
`Testimony on “Oversight of the Securities and Exchange Commission,” Before the U.S. Senate
`Committee on Banking, Housing, and Urban Affairs, Chairman Jay Clayton,
`U.S. Sec. & Exch. Comm’n (Dec. 10, 2019), bit.ly/2TmHMMz ............................................. 16
`
` vi
`
`

`

`Case 6:24-cv-00197-ADA Document 76 Filed 08/30/24 Page 7 of 29
`
`
`
`Timothy Gardner & Raphael Satter, U.S. Energy Dept Gets Two Ransom Notices as
`MOVEit Hack Claims More Victims, Reuters (Jun. 16, 2023), bit.ly/3yFnHIe ....................... 11
`
`U.S. Dep’t of Justice, Chinese Military Personnel Charged With Computer Fraud, Economic
`Espionage and Wire Fraud for Hacking Into Credit Reporting Agency Equifax
`(Feb. 10, 2020), bit.ly/3mInj0I .................................................................................................. 12, 13
`
`Why Your Birth Date is Important to Hackers?, Hackology (June 24, 2018),
`bit.ly/3lx2eFR ..................................................................................................................................... 11
`
`
`
`
`
` vii
`
`

`

`Case 6:24-cv-00197-ADA Document 76 Filed 08/30/24 Page 8 of 29
`
`INTEREST OF AMICUS CURIAE1
`
`The American Securities Association (ASA) is a trade association that represents the
`
`retail and institutional capital markets interests of regional financial services firms who provide
`
`Main Street businesses with access to capital and advise hardworking Americans how to create
`
`and preserve wealth. ASA’s mission is to promote trust and confidence among investors,
`
`facilitate capital formation, and support efficient and competitively balanced capital markets.
`
`This mission advances financial independence, stimulates job creation, and increases
`
`prosperity. ASA has a geographically diverse membership base that spans the Heartland,
`
`Southwest, Southeast, Atlantic, and Pacific Northwest regions of the United States. ASA
`
`believes that the Commission’s collection of personally identifiable information (PII) through
`
`the Consolidated Audit Trail (CAT) will create significant risks for investors by exposing them
`
`to warrantless government surveillance and cybercrime. These risks will undermine Main
`
`Street investor confidence and chill investment decisions, harming the capital markets that
`
`ASA seeks to promote. ASA has spoken out about the CAT for years and is also involved in
`
`other litigation challenging the SEC’s actions concerning the CAT. See ASA v. SEC, No. 23-
`
`13396 (11th Cir.).
`
`U.S. Attorney General William P. Barr served as the seventy-seventh and the eighty-
`
`fifth Attorney General of the United States. During these tenures, the Department of Justice
`
`steadfastly defended the rule of law, including the proper enforcement of federal statutes and
`
`the Fourth Amendment. General Barr has opposed the SEC’s collection of PII through the
`
`
`1 This brief was not authored in whole or in part by counsel for any party and no person or
`entity other than amici curiae or their counsel has made a monetary contribution toward the
`brief’s preparation or submission. All parties were notified of and consented to this brief.
`
`

`

`Case 6:24-cv-00197-ADA Document 76 Filed 08/30/24 Page 9 of 29
`
`
`
`CAT because it lacks congressional authorization; invites abusive investigations; creates a
`
`single repository that will be hacked, stolen, or misused; and clearly violates the Fourth
`
`Amendment’s limits by collecting private information on tens of millions of investors without
`
`any connection to suspected wrongdoing. See Att’y Gen. William P. Barr, The Securities and
`
`Exchange Commission Is Watching You, The Wall Street Journal (Apr. 15, 2024), bit.ly/3Yvg2a7.
`
`Formed in 2022, the American Free Enterprise Chamber of Commerce (AmFree) is a
`
`501(c)(6) organization that represents hard-working entrepreneurs and businesses across all
`
`sectors to serve as the voice for pro-business and free market values. AmFree conducts
`
`research and develops policy initiatives designed to support free, fair, and open markets that
`
`spur economic growth. AmFree’s members have been saddled with overly burdensome
`
`regulations and harmed by the expansion of the federal regulatory state. They are concerned
`
`about this relentless regulatory advance and its effect on the U.S. financial services sector,
`
`which undermines the ability of firms to provide market access to ordinary Americans and
`
`threatens the status of America’s financial markets. AmFree files amicus briefs in important
`
`regulatory and constitutional cases to support reining in the administrative state and to
`
`promote constitutional accountability.
`
`Defendants try to paint the Consolidated Audit Trail (CAT) as a mundane enforcement
`
`INTRODUCTION
`
`program that raises few legal and privacy concerns. Not so. Amici write to highlight several
`
`reasons why the CAT’s collection of personally identifiable information (PII) raises a major
`
`question and violates the Fourth Amendment.
`
` 2
`
`

`

`Case 6:24-cv-00197-ADA Document 76 Filed 08/30/24 Page 10 of 29
`
`
`
`The major questions doctrine was designed for cases like this. The “size [and] scope”
`
`of the CAT’s collection of investors’ PII represents an “unprecedented” threat to investor
`
`safety, privacy, and freedom. Ala. Ass’n of Realtors v. HHS, 594 U.S. 758, 765 (2021). “[I]n its
`
`[90 years] of existence, [the SEC] has never before adopted a broad [surveillance] regulation
`
`of this kind.” NFIB v. OSHA, 595 U.S. 109, 119 (2022). There are over 100 million American
`
`investors, and all of them “fal[l] within” the CAT dragnet. Ala. Realtors, 594 U.S. at 764. The
`
`“‘economic impact’” of this undertaking—especially from security breaches—is “significant.”
`
`Biden v. Nebraska, 143 S. Ct. 2355, 2373 (2023). And “the issues at stake” in the mass-collection
`
`of PII “are not merely financial.” Ala. Realtors, 594 U.S. at 764. The CAT’s ability to monitor
`
`every trade and to link each trade to individual investors in real time gives the SEC “unheralded
`
`power to regulate ‘a significant portion of the American economy,’” and will “bring about an
`
`enormous and transformative expansion in [the SEC’s] regulatory authority.” Util. Air Regul.
`
`Grp. v. EPA, 573 U.S. 302, 324 (2014). It will “‘significantly alter … the power of the
`
`Government over private property” and individual privacy. Ala. Realtors, 594 U.S. at 764.
`
`The CAT’s collection of investors’ PII has also been “the subject of an ‘earnest and
`
`profound debate’ across the country.” Gonzales v. Oregon, 546 U.S. 243, 267 (2006). For years
`
`this issue has provoked opposition from members of Congress and the public because of dire
`
`concerns about cybersecurity and privacy. This is further evidence of a major question because
`
`it shows that “the basic and consequential tradeoffs inherent in [the CAT] … are ones that
`
`Congress would likely have intended for itself,” Biden, 143 S. Ct. at 2375 (cleaned up), making
`
`“‘the claimed delegation all the more suspect,’” West Virginia v. EPA, 597 U.S. 697, 732 (2022).
`
` 3
`
`

`

`Case 6:24-cv-00197-ADA Document 76 Filed 08/30/24 Page 11 of 29
`
`
`
`The CAT’s collection of PII also violates the Fourth Amendment. Requiring every
`
`American investor to turn over their personal data with no suspicion of wrongdoing not only
`
`undermines settled expectations of privacy that undergird the investor-broker relationship but
`
`also fails to satisfy the constitution’s bare minimum requirement of “reasonableness.” The
`
`Court should deny the motions to dismiss and grant the Plaintiffs’ motion for a stay and
`
`preliminary injunction.
`
`ARGUMENT
`
`I.
`
`The legality of SEC’s collection of PII through the CAT is a major question.
`
`A.
`
`The CAT’s unprecedented collection of investors’ PII has vast political
`and economic significance.
`
`The CAT is a “comprehensive surveillance database,” not “an innocuous repository of
`
`dry economic data.” Comm’r Hester M. Peirce, Statement of Hester M. Peirce in Response to Release
`
`No. 34-88890; File No. S7-13-19 (May 15, 2020), bit.ly/3gUHeqp (Peirce Statement). This
`
`database will contain a “comprehensive record of decisions made by millions of Americans,”
`
`including “every equity and option trade and quote, from every account at every broker, by
`
`every investor.” Id. Access to this vast trove of data is minimally restricted, with “[t]housands
`
`of Commission staff and employees of the participants” having potential access. Id. The CAT
`
`“is required to be able to support a minimum of 3,000 users at one time,” id., who have “access
`
`‘to every trade, from every account, from every broker, for every retail investor in America.’”
`
`SIFMA, Senate Banking Committee Hearing on the CAT (Oct. 22, 2019), bit.ly/33hrSqM (quoting
`
`Sen. Tom Cotton). The Commission and self-regulatory organizations (SROs), such as the
`
`national stock exchanges and FINRA, can access this data for “surveillance [or] regulatory
`
`purposes.” 17 C.F.R. §242.613(e)(4)(i)(A); see CAT NMS Plan §6.5(c), bit.ly/4caHuNy.
`
` 4
`
`

`

`Case 6:24-cv-00197-ADA Document 76 Filed 08/30/24 Page 12 of 29
`
`
`
`Contrary to the SEC’s effort to now downplay the size and scope of the CAT, see SEC
`
`Mot. 26-32 (likening the CAT to “prior audit trails”), the SEC has long acknowledged that this
`
`massive surveillance system is “‘unprecedented.’” Chair Gary Gensler, Statement on CAT
`
`Funding (Sept. 6, 2023), bit.ly/46pLLeR (quoting Chariman Mary L. Shapiro, Opening Statement
`
`at SEC Open Meeting: Consolidated Audit Trail (July 11, 2012), bit.ly/3yBoI40). It has vast political
`
`and economic significance for several reasons.
`
`1.
`
`The CAT’s collection of PII threatens individual freedom.
`
`First, the CAT’s collection of PII has vast political significance because of the profound
`
`risks that it poses to individual freedom. “The non-financial costs of being surveilled reach to
`
`the very core of our humanity.” Peirce Statement. Freedom of thought, expression, and action
`
`are “the basis of our national strength and of the independence and vigor of Americans.”
`
`Tinker v. Des Moines Indep. Cmty. Sch. Dist., 393 U.S. 503, 508-09 (1969). But “[u]ntargeted
`
`government surveillance programs, even well-intentioned ones, threaten that freedom.” Peirce
`
`Statement. That is because “[a]wareness that the government may be watching chills”
`
`individuals’ activities. United States v. Jones, 565 U.S. 400, 416 (2012) (Sotomayor, J., concurring).
`
`There is a reason why sensitive economic data that an investor “intend[s] to be kept
`
`confidential” is her “property” and must be respected as such. Carpenter v. United States, 484
`
`U.S. 19, 28 (1987). Economic transactions, including investment decisions, can “express a view
`
`of how markets work, a determination on the efficiency of markets, expectations about the
`
`future, or even a moral philosophy,” and thus “offer a window into a person’s deepest
`
`thoughts and core values.” Peirce Statement. For example, “an investor may purchase shares
`
`of a clothing company because he likes the political messages of its celebrity spokesperson or
`
` 5
`
`

`

`Case 6:24-cv-00197-ADA Document 76 Filed 08/30/24 Page 13 of 29
`
`
`
`shares of a restaurant chain because it donates to his favorite charity.” Id. Another investor
`
`“may choose to avoid or sell companies that are associated with things he opposes,” such as
`
`carbon emissions, tobacco, and guns. Id. Individuals have a right to expect their views on
`
`sensitive and emotional issues without being tracked and recorded by the government. See
`
`Carpenter v. United States, 585 U.S. 296, 311 (2018) (the fact that “records are generated for
`
`commercial purposes … does not negate [an] anticipation of privacy”).
`
`Investors may also “fear rebukes from other people [for their] trading decisions.”
`
`Peirce Statement. They could face public pressure for investing in energy companies, cigarette
`
`manufacturers, or weapons makers, or be publicly shamed for not investing in companies that
`
`score high on Environmental, Social, and Governance (ESG) factors. See Comm’r Hester M.
`
`Peirce, Scarlet Letters: Remarks Before the American Enterprise Institute, (June 18, 2019),
`
`bit.ly/3pCbaMh. “[I]n our modern corporate ESG world, there is a group of people who take
`
`the lead in instigating their fellow citizens into a frenzy of moral rectitude. Once worked up,
`
`however, the crowd takes matters into its own brutish hands and finds many ways to exact
`
`penalties from the identified wrongdoers.” Id.
`
`Because human dignity requires that individuals have “personal privacy” over who they
`
`support with their economic transactions, Sorrell v. IMS Health Inc., 564 U.S. 552, 579-80 (2011),
`
`investors are entitled to invest based on their moral, ethical, or religious beliefs without making
`
`a public statement or coming under perpetual surveillance. But the CAT’s “compelled
`
`disclosure” of investors’ transactions will lead investors to “fear … exposure of their beliefs …
`
`[and] the consequences of this exposure.” NAACP v. Ala. ex rel. Patterson, 357 U.S. 449, 462-
`
`63 (1958). And that fear is not unreasonable. “One can imagine a future in which a delectably
`
` 6
`
`

`

`Case 6:24-cv-00197-ADA Document 76 Filed 08/30/24 Page 14 of 29
`
`
`
`large database of trades becomes a tool for the government to single people out for making
`
`trading decisions that reflect—or are interpreted to reflect—opinions deemed unacceptable in
`
`the reigning gestalt.” Peirce Statement. “[O]ur Constitution was designed to avoid these ends
`
`by avoiding [their] beginnings.” W. Va. State Bd. of Educ. v. Barnette, 319 U.S. 624, 641 (1943).
`
`The CAT’s unprecedented infringement on freedom and privacy also has constitutional
`
`dimensions, which further highlights its vast political significance. “[T]he individual interest in
`
`avoiding disclosure of personal matters” is at the heart of the constitutional right to privacy.
`
`Whalen v. Roe, 429 U.S. 589, 599 (1977). This includes a “constitutionally protected interest in
`
`the confidentiality of personal financial information.” Statharos v. N.Y.C. Taxi & Limo. Comm’n,
`
`198 F.3d 317, 322-23 (2d Cir. 1999); see also Cal. Bankers Ass’n v. Shultz, 416 U.S. 21, 78-79
`
`(1974) (Powell, J., concurring) (“Financial transactions can reveal much about a person’s
`
`activities, associations, and beliefs. At some point, governmental intrusion upon these areas
`
`would implicate legitimate expectations of privacy.”).
`
`Similarly, “[t]he First Amendment prohibits the use of compulsion to exact from
`
`individuals (or groups) the wholesale disclosure of their associational ties where such inquiry
`
`is [n]ot germane to the determination of whether a crime has been committed.” Reporters Comm.
`
`for Freedom of Press v. AT&T Co., 593 F.2d 1030, 1054 n.82 (D.C. Cir. 1978). And, of course,
`
`the CAT data will “offer a window into [investors’] deepest thoughts and core values” and
`
`often reflect their “moral, ethical, or religious beliefs.” Peirce Statement.
`
`Government actions that infringe on the right to privacy or the First Amendment are
`
`subject to heightened scrutiny. See Statharos, 198 F.3d at 324; John Doe No. 1 v. Reed, 561 U.S.
`
`186, 196 (2010). But the sweeping and invasive data harvesting that the Commissions plans to
`
` 7
`
`

`

`Case 6:24-cv-00197-ADA Document 76 Filed 08/30/24 Page 15 of 29
`
`
`
`undertake cannot survive such scrutiny. Requiring everyday Americans to disclose sensitive
`
`information without any reasonable suspicion of wrongdoing is far from narrowly tailored and
`
`furthers no government interest.
`
`2.
`
`The CAT’s collection of PII risks improper enforcement.
`
`Adding to its vast political significance, the CAT’s collection of PII will also create an
`
`enormous data pool that will enable “[s]taff at the Commission and at the exchanges [to] wade
`
`through the data pool to troll for securities violations.” Comm’r Hester M. Peirce, Intellectual
`
`Siren Song (Sept. 18, 2020), bit.ly/3lT0wyN. This tracking of “unsuspected and unsuspecting
`
`Americans’ every move in the hopes of catching them in some wrongdoing” is not “consistent
`
`with the principles undergirding the Constitution.” Id. It is blackletter law that “[a]gencies are
`
`… not afforded ‘unfettered authority to cast about for potential wrongdoing.’” CFPB v.
`
`Accrediting Council for Indep. Co