February 28, 2012 / 7:35 PM / 6 years ago

US regulators propose rules to protect against identity theft

* SEC, CFTC propose identity theft protection rule

* Rule is required by the Dodd-Frank law

* Firms would need to develop programs to protect investors

* Proposed rule not considered controversial

By Sarah N. Lynch

WASHINGTON, Feb 28 (Reuters) - New rules proposed by federal market regulators on Tuesday would require mutual funds and securities and commodities brokerages to develop programs to protect investors against identity theft.

The proposal, issued jointly by the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission, stems from a requirement in the 2010 Dodd-Frank Wall Street overhaul law.

That provision in the law transferred some authority over certain parts of the Fair Credit Reporting Act from the Federal Trade Commission to the SEC and CFTC. The Fair Credit Reporting law sets standards for the collection, communication, and use of information about consumers by consumer reporting agencies.

The SEC and CFTC’s proposal would require certain firms they regulate to come up with a written identity theft program with certain policies and procedures. Under that program, financial firms would need to identify and detect red flags, respond to them and update the program as needed.

The proposal is similar to rules that were already adopted by the FTC and several other federal financial regulators in 2007.

The SEC and CFTC issued the proposed rules after commissioners at each agency voted behind closed doors to seek public comments on the plan.

The identity-theft provision in Dodd-Frank has not been considered controversial, and has not received widespread media attention.

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