Forefront Communications

Pensions & Investments: SEC Delays CAT Deadline So Firms Can Focus on Business Continuity


Forefront Communications

Forefront Communications

Clients STA and n-Tier comment on the SEC‘s decision to delay the CAT deadline so firms can focus on business continuity. 

Broker-dealers that have spent months preparing to report data to the SEC’s consolidated audit trail next month now have a reprieve of sorts, with the SEC allowing firms to focus more of their time and energy on the COVID-19-induced market mayhem.

On March 17, the Securities and Exchange Commission released a no-action letter saying staff will not enforce CAT implementation deadlines, the next of which is April 20 when broker-dealers are required to submit data to the CAT on trades they execute on behalf of clients — including institutional investors. The letter applies through May 20 but could be extended.

Before the pandemic, CAT’s cybersecurity was one of the major concerns for stakeholders. The huge data repository could attract the attention of cybercriminals, industry members said.

When fully implemented, the CAT will ingest more than 58 billion records a day and be the world’s largest data repository on securities transactions, tracking all orders throughout their life cycles, according to a 2019 CAT NMS news release.

Peter Gargone, founder and CEO of n-Tier Financial Services LLC, a New York-based technology company that helps institutions minimize risks and costs associated with regulatory reporting, said similar data has been collected under other regulatory systems, like FINRA’s Order Audit Trail System, but having the data in one central location does make the CAT “a target.”

Separately, as the CAT has been built out, the SROs have been unable to collect fees from industry members, but will once reporting begins and a fee schedule is approved by the SEC.

The CAT NMS operating committee must propose a fee schedule, which will then be subject to a notice and comment period and SEC approval.

Jim Toes, president of the Security Traders Association, New York, said the SROs “have been the ones laying out the money on what’s being done, so in fairness to the SROs they do need to be recouping some of these costs. But he’s concerned “with how much time is going to be afforded the industry to comment.”

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