Reflective of an increased interest in data privacy concerns, on February 28, 2012, the Securities and Exchange and Commodity Futures Trading commissions jointly released proposed rules designed to protect investors from identity theft by mandating the creation of programs to detect potential security threats.  The proposed rules are meant to implement Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The written identity theft prevention programs mandated under the proposed rules would be designed to detect, prevent and mitigate identity theft in connection with certain existing accounts or the opening of new accounts.  Such programs would be triggered by the occurrence of certain “red flags,” including such patterns, practices and specific activities that indicate a potential instance of identity theft.

The proposed rules would apply to broker-dealers, mutual funds and other SEC-regulated entities, as well as future commission merchants, retail foreign exchange dealers, commodity trading advisers, commodity pool operators, introducing brokers, swap dealers and major swap participants on the CFTC side.

The release also includes guidelines to assist entities in their compliance with the proposed rules.

Authorship Credit: Robert A. Oestreicher