Privacy Letter
March 8, 2001
Ms. Susan Binns
Director
Directorate General Internal Market
Avenue Cortenberg #107/5/29
1049 Brussels
Belgium
RE: EU/U.S. Cooperation on Financial Data Privacy
Dear Ms. Binns:
On behalf of the U.S. Securities Industry Association, I want to express to you our views on EU and U.S. cooperation on financial data privacy and especially on the current draft decision of the Commission for model contract provisions. Specifically, we write to: 1) strongly support the U.S. administration's policy of encouraging the EU in due course to make a determination of adequacy under the Directive with respect to the U.S. financial services sector; 2) urge that the draft model contract provisions be amended in accordance with the technical and practical recommendations proposed by our European counterparts in order to ensure their commercial viability for use by European companies in connection with transfers to jurisdictions other than the U.S. that are not deemed adequate; and 3) continue to explore the various routes contemplated under the Directive other than the model contracts that will enable globally active firms to transfer personal data across borders, in particular within affiliated groups where group policies and procedures may prove to be the most practical alternative.
Determination of Adequacy
The U.S. securities industry has long provided innovative services to its clients. We have done this by earning the public's trust and confidence, which includes the protection of customer privacy. As you know, we believe that Title V of the Gramm-Leach-Bliley Act imposes clear, comprehensive and rigorous privacy obligations on financial services firms which, in combination with the obligations imposed by the Fair Credit Reporting Act (FCRA), provide sound protection for personal data handled by the financial services industry. Moreover, the SEC, the securities SROs and the Federal Reserve 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 the privacy policies which Title V mandates that they develop and regularly notify to their customers.
Finally, in addition to GLB and FCRA, abuses of private information would be captured by many existing principles, statutes, and rules, and these provisions are reflected in members' practices. Violations of the provisions, moreover, could give rise to private civil liability, government enforcement action, or even criminal liability. In this connection, it is important to note that, unlike certain other industries, securities SROs and other financial services regulators maintain extensive examination and oversight staffs and possess extensive sanction authority, which they have used, for non-compliance with rules concerning the misuse of confidential information.
Commercially Viable Model Contracts and other Methods of Cross Border Transfers
As globally active firms, our members are fully informed of their European affiliates' concerns about the draft decision. It is our understanding that our European counterparts believe that the model contract in its current form will not be a commercially viable document without substantial amendment. The free flow of data is critical to the successful operation of global financial services firms and to the provision of products and services that respond to the needs of the marketplace. Without commercially practicable mechanisms to enable the free flow of data, the efficiency of the international capital markets will be seriously hampered.
In this regard, we urge the Commission and the member state data authorities to provide guidance and scope in practice for the various routes contemplated under the Directive to enable globally active firms to transfer data across borders. Specifically, we respectfully request the Commission to include among these methods the approval of group policies and procedures by firms or sectors operating throughout the EU. Within affiliated entities group policies and procedures may prove to be the most practical alternative
We look forward to discussing this with you at your convenience.
Sincerely,
David G. Strongin
Vice President and Director,
International Finance