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FINRA CEO addresses status of Consolidated Audit Trail database

On Behalf of | Oct 17, 2023 | FINRA Compliance

The CEO of the Financial Industry Regulatory Authority spoke out recently on the significance of the Consolidated Audit Trail’s transaction database, ThinkAdvisor reports.

The CAT is a central repository created by the Securities and Exchange Commission to allow regulators to track the activity of broker-dealers throughout US markets in national market system securities. As of March 17, the personal identifiable information of investors became available through the CAT.

Speaking at the Securities Traders Association’s annual Market Structure conference, FINRA CEO Robert Cook said CAT had accomplished its mission and been successful in meeting its goals.

“If you go back and think about what was the purpose of CAT — coming out of the flash crash, the SEC wasn’t in a position to reconstruct what happened; it didn’t have the data available,” Cook said. “Fast forward to today, we have an integrated consolidated audit trail that allows for surveillance of all listed products in [over the counter] trading; it allows for market reconstruction, it allows for policy informing/policy analysis.”

Cook added there may be a need to reduce the amount of information gathered by CAT due to privacy concerns.

Under requirements taking effect in June 2020, large industry members that originated or received an order involving national market system or over-the-counter equity securities had to report related data to the CAT repository. FINRA uses CAT data to detect manipulative activity and other potential violations of federal securities laws and regulations.

Cook added in his remarks that FINRA has expressed its opposition to a revised funding model for CAT approved last month by the SEC, saying that it is not an appropriate allocation of the costs of the system.

The SEC plan establishes a fee schedule for the self-regulatory organizations that participate in CAT.

FINRA said that the plan would “concentrate a substantial share of the self-regulatory organization responsibility for funding CAT on FINRA — more than double that of the next highest participant and $4 million more than all option exchanges combined.”

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