Washington, D.C., September 6, 2023 – SIFMA today issued the following statement from Kenneth E. Bentsen, Jr., president and CEO of SIFMA, on the Securities and Exchange Commission (SEC) approval of the self-regulatory organizations (SROs) proposed amendment to the National Market System Plan Governing the Consolidated Audit Trail (CAT NMS Plan) to adopt a revised funding model, known as the Executed Share Model, for the CAT:

“SIFMA plans to carefully review the Commission’s approval order for the funding model.  As noted in our comment letters, SIFMA finds the CAT funding model created and designed by the SROs to be deeply flawed.  First, as explained in our June 2023 comment letter, the funding model provides for inequitable allocation of CAT costs between industry member broker-dealers and the SROs. Taking into account industry member funding of FINRA, the model assigns over 80% of CAT costs to industry member broker-dealers.  While industry members recognize and accept that they will be responsible for a portion of the costs of the CAT, this allocation of fees is unfair and does not meet the standards under the Securities Exchange Act of 1934 governing SRO fees. This unfair allocation of CAT costs is especially problematic given that industry members have no role in the governance, oversight, or design of CAT and obtain no direct tangible benefits from its operation—indeed, the industry has not even been permitted to obtain or review CAT data used in the context of SEC regulatory initiatives.

“Second, as outlined in our May 2023 comment letter, we strongly disagree with the SROs determination of which industry member broker-dealer will be assessed CAT fees.  We believe the most reasonable way to allocate CAT costs among industry members is to make the industry member that originated the ultimately executed order the one responsible for CAT fees.

“Third, as noted in our July 2023 comment letter, rising CAT costs, which currently have no legal limit or mechanism for control that is being implemented, need to be addressed.

“When fully implemented, the CAT will be the largest database of retail and institutional trading data ever created.  It also will include personal information on every retail brokerage customer in America, as well as identifying information for every pension fund, mutual fund, and other institutional account in America. The SEC has failed to implement the CAT data security rule for three years, which leaves customers’ personal information unprotected in the massive CAT database.  That open-ended risk, along with the out-of-control costs, point again to the need to address fundamental issues with the CAT.  The need to get this right is essential.”

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SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development.  SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).