The Securities and Exchange Commission has proposed new rules aimed at safeguarding investors from identity theft by requiring broker-dealers, mutual funds and other SEC-regulated entities create programs to detect and respond to “red flags” indicating possible identity theft.
The proposed rules are substantially similar to the so-called “Red Flags Rules” adopted in 2007 by the Federal Trade Commission and other federal financial regulatory agencies that were previously required to adopt such rules. The Red Flags Rule was originally promulgated under the Fair and Accurate Credit Transactions Act of 2003, but the requirements were repeatedly delayed by the FTC under pressure from various industry groups. Congress finally exempted accountants from the Red Flags Rule in December 2010, along with physicians, law firms, and other types of professional service providers (see Congress Exempts CPAs from Red Flags Rule).
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