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Brokers must soon begin sending sensitive information derived
from their clients' trades to a new database called the
Consolidated Audit Trail (CAT) that the Securities and Exchange
Commission tasked exchange operators and the Financial Industry
Regulatory Authority (FINRA) with building and operating.
But before they begin sending the information, the brokers must
sign an agreement that limits the financial liability of the
exchanges and FINRA, collectively called self-regulatory
organizations (SROs), to $500 per reporting firm if there is a
breach of that data.
That puts the brokers on the hook for any security breaches of
the database, which they have no control over, said Kenneth
Bentsen, chief executive officer of the Securities Industry and
Financial Markets Association (SIFMA), which represents banks,
broker-dealers and asset managers.
"SIFMA's guiding principle is 'they who hold the data bear the
liability,'" Bentsen said in a statement.
SIFMA petitioned the SEC to stay the requirement that brokers
sign the agreement before they begin sending the mandated data,
which includes sensitive transactional and financial information
of their customers, and open the process up to public comment.
The CAT will allow regulators to track all trades from their
inception, pinpointing buyers, sellers, exchanges and brokers
involved, with one former SEC commissioner likening it to a
Hubble Space Telescope for the securities markets.
The project has faced years of delays, the most recent of which
came on Monday when the SEC extended the deadline for
broker-dealers to begin submitting reports to June 22, instead
of May 20, due to disruptions caused by the coronavirus crisis.
(Reporting by John McCrank; editing by Jonathan Oatis)
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