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February 4, 2000
The Honorable David L. Aaron
Under Secretary of Commerce for International Trade
Department of Commerce
Room 3850
14th Street and Constitution Avenue, N.W.
Washington, DC 20230
The Honorable Timothy F. Geithner
Under Secretary of the Treasury for International Affairs
Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, DC 20220
Re: U.S.-EU Privacy Discussions and The Impact of U.S. Financial Modernization
Dear Mr. Ambassador and Mr. Under Secretary:
On behalf of the Securities Industry Association's International Trade and Investment Policy Committee, I am writing to urge the Administration to continue its efforts to obtain from the European Union a declaration that Title V of the Financial Modernization Act, in combination with the Fair Credit Reporting Act (FCRA), constitutes "adequate" protection for personal data handled by the securities industry. Accordingly, it should be unnecessary for securities firms to self-certify under the Safe Harbor. Indeed, if such a declaration is not forthcoming, the securities industry could shortly find itself in the position of having to comply with two complex and different privacy regimes – the Safe Harbor as well as the new requirements under Title V – or face the risk of costly and damaging transatlantic data stoppages. The possibility of privacy legislation at the state level only magnifies the potential problems created by such overlapping and inconsistent regulatory regimes.
As you know, Title V imposes affirmative and comprehensive privacy obligations on securities firms, and directs the Securities and Exchange Commission to adopt regulations and examination guidelines to ensure that securities firms comply with the obligations imposed under Title V provisions. The SEC and the securities SROs have substantial authority to receive customer complaints about, and take action against, firms that fail to comply with the comprehensive federal regulatory scheme or fail to fulfill their representations under their privacy policies, which Title V mandates that they develop and regularly inform their customers about. Moreover, the Act does not preclude even more restrictive state laws and regulations.
The Committee strongly believes there is no reason for the EU to supplement the extensive privacy scheme that Congress has enacted. Article 25 of the EU Directive requires "adequate" not "equivalent" protection. Title V, when combined with the FCRA and the regulatory oversight provided by the SEC and SROs, such as the NYSE and NASD-R, clearly provides vadequate" protection for the securities industry. As a result, unimpeded data flow between Europe and the U.S. for financial services activities should be permitted without the need for Safe Harbor certification.
If the EU is not willing to find the U.S. privacy regulation as "adequate," then at the very least, the Commission and the Member States should defer any determination with respect to the "adequacy" of Title V and the other relevant privacy regulations until the Commission can observe how Title V is interpreted and applied in practice. Indeed, this process has already started. On February 3, 2000, the Office of the Comptroller of the Currency, in concert with the Board of Governors of the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision, jointly released proposed rulemaking for implementing new privacy protections. In light of these developments, we call on the Treasury and DOC to request that the EU extend the data stoppage standstill for a period of at least 18 months.
We look forward to continuing to work with the Administration and Congress in refining privacy policies that work to protect consumers without damaging the ability of U.S. firms to compete in the global marketplace. However, we strongly believe that the strenuously debated provisions of Title V should be given the opportunity to succeed before European standards are imported, without the benefit of legislative debate, into the US financial services industry.
Sincerely,
David G. Strongin
SIA Vice President and Staff Advisor,
SIA International Trade and Investment Policy Committee
c: Gregory A. Baer
Gary Gensler
