Feds Are Stealthily Violating Millions of Americans’ Fourth Amendment Rights

Imagine if you will: Every week, the FBI visits the local self-storage business in your hometown and, with not even an inclination that a crime has occurred, searches the private papers and property kept inside. Or picture DEA agents on a nightly basis searching every car parked on the street in a high-crime area. Most of the searches uncover nothing, but every few months, the agents discover something that creates a reasonable suspicion that the unknown owner of one of the storage units or cars may have committed a crime. The agents then run the VIN or subpoena the self-storage company to learn the identity of the individuals whose property they had previously searched.

There isn’t a court in the country that would allow federal prosecutors to rely on the knowledge the FBI obtained during the causeless searches to establish reasonable suspicion of a crime, merely because at the time that the agents rifled through the property they didn’t know the name of the car or unit’s owner. Yet that is precisely what federal agents are doing to every American who trades on the national stock exchanges.

The New Civil Liberties Alliance has been attempting to halt this outrageous violation of the Fourth Amendment for nearly two years. Now, not only is the Securities and Exchange Commission defending the government’s causeless searches of Americans’ trading data, but the federal agency is also attempting to delay traders’ day in court by seeking another six-month stay in Davidson v. Atkins. NCLA is opposing that stay and pushing instead for the court to grant its motion for a preliminary injunction to enjoin the seizures mandated by the SEC regulations that established the Consolidated Audit Trail (“CAT”) and to bar the federal government from later searching CAT without cause.

In Davidson v. Atkins, NCLA challenges the SEC regulations that established CAT—a monstrous database first imagined in 2010 during the Obama Administration. In 2012, without any Congressional authorization to do so, the SEC promulgated Rule 613 which directed the creation of CAT to track “every order, cancellation, modification and trade execution for all exchange-listed equities and equity options across all U.S. markets.” But rather than launch CAT itself, the SEC, by regulation, directed various “self-regulated organizations” (SRO), such as the Financial Industry Regulatory Authority (FINRA) and some two-dozen other national securities exchanges to create CAT.

As former Attorney General Bill Barr declares: “without congressional authorization and under the radar of most Americans, the commission is trying to impose [the CAT] by executive fiat. CAT will reportedly be the single largest government database targeting the private activities of American citizens.”

It would be another decade before the SEC began requiring broker-dealers in June 2022 to begin populating the CAT Central Depository database with investors’ private information. Full implementation of CAT began in 2024, giving the SEC—as well as some 3,000 people, including private individuals working for the exchanges or other companies—access to data. As former Attorney General Barr says, “Concentrating this sensitive data in a single repository guarantees it inevitably will be hacked, stolen, or misused by bad actors, including hostile nations, cybercriminals and faithless government employees.”

Since then the SEC’s “Market Abuse Unit’s Analysis and Detection Center” has reportedly used “data analysis tools” to search the CAT database of investors’ private financial information for what the government calls “suspicious trading patterns.” Although the SEC lacks even an inkling of a crime, the federal agency shrugs at these computerized fishing expeditions into American investors’ financial data by noting that CAT purportedly plans to no longer store the names and addresses of the individual traders. That information, the SEC notes, will in the future only be obtainable from the brokers.

But whether the SEC knows the identity of the trader at the time it undertakes a suspicion-less search of the investors’ data is irrelevant for purposes of the Fourth Amendment. Just as the government cannot justify its rifling through Americans’ self-storage units or automobiles parked in high-crime areas without cause—and in some cases even a warrant—merely because agents don’t know the name of the owner, so too the SEC can’t scour the CAT database merely because the investors are identified by a number and not their name. (And, incidentally, this encoded number, known as a CAT Customer ID (CCID), like all such devices, is not free from risk of hacking.)

Former Attorney General Barr calls CAT’s violation of Fourth Amendment rights “clear,” stressing the program “collects the private information on tens of millions of investors without any connection to suspected wrongdoing, either by the investor or anyone else.”

NCLA has presented this significant Fourth Amendment argument to a federal judge in the Western District of Texas on behalf of its clients, two Texas investors, Erik Davidson and John Restivo, as well as the National Center for Public Policy Research, which invests in U.S. securities. NCLA has also recently sought certification of the case as a class-action lawsuit.

However, rather than give the Plaintiffs their day in Court, the SEC seeks delay. Just last week, after obtaining one six-month stay in this case, the SEC filed a second motion for an additional six-month abeyance. The SEC suggests it needs more time to engage in a “comprehensive rethink” of the functioning of CAT, all while continuing to seize and search Americans’ financial data without cause.

The Fourth Amendment violations—while monumental—are but a fraction of the constitutional problems with CAT. Congress never authorized the SEC to establish CAT; nor did it appropriate any money to fund the establishment of the database. In fact, while this case was first stayed, the Eleventh Circuit Court of Appeals in American Securities Association v. SEC, 147 F.4th 1264 (11th Cir. 2025), held that CAT’s funding mechanism, which allowed the SROs to pass on the cost of CAT to the investing public, violated the Administrative Procedure Act. The cost to establish and run CAT, however, may be the least of its many defects: CAT also represents a huge risk to Americans’ savings, with the database creating a hack-risk of untold proportions.

No fine-tuning of CAT will overcome these fundamental problems, for as former Attorney General Barr poignantly noted: “CAT’s sweep is unprecedented and would take us far down the road toward an Orwellian surveillance state.” And, so, NCLA is asking the court to act now and reject the SEC’s delay tactic.