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Application for Review of Action Taken by CAT LLC and Certain SROs in Violation of Exchange Act Sections 19(d) and 19(f)

Summary

SIFMA applies for review of action taken by Consolidated Audit Trail, LLC and certain Self-Regulatory Organizations (SROs) in violation of Exchange Act Sections 19(d) and 19(f).

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Committee

Operations & Technology, Equity Markets and Trading Committee, Listed Options Trading Committee

Date

22

April

2020

Excerpt

Re: Application of Securities Industry and Financial Markets Association For Review of Action Taken by CAT LLC and Certain Self-Regulatory Organizations in Violation of Exchange Act Sections 19(d) and 19(f)

As set forth in the Application, SIFMA respectfully requests that the Commission set aside action taken by the SROs that prohibits and limits access of SIFMA members to the Consolidated Audit Trail (“CAT”) System, which is operated and managed by the SROs through Consolidated Audit Trail, LLC (“CAT LLC”). The challenged SRO action prohibits and limits access to services offered by the SROs in violation of Exchange Act Sections 19(d) and 19(f).

SIFMA further requests, pursuant to Commission Rule of Practice 401, that the challenged SRO action limiting access to the CAT System be stayed until the Commission has an opportunity to consider and rule on SIFMA’s Application. A stay will enable Industry Members to submit CAT data and advance the purposes of the CAT without the improper limitations on access to the CAT System imposed by the SROs. In the alternative, SIFMA requests a stay of CAT deadlines that require access to the CAT System.

As described in the Application, the SROs have prohibited and limited access to the CAT System by requiring that Industry Members execute a proposed CAT Reporter Agreement (the “CRA”) as a condition of submitting data to the CAT. The  CRA purports to limit SRO liability in the event of a CAT data breach and impose unfair risks and responsibilities on Industry Members. The CRA was never filed by the SROs for notice-and-comment and has not been approved by the SEC. It should therefore be set aside by the Commission under Exchange Act Sections 19(d) and 19(f).

SIFMA’s guiding principle is “they who hold the data bear the liability.” Under the CRA, the contrary is true: firms and clients will have all the risk despite having no control over the data. Although SIFMA and its members fully support the CAT and have invested substantial resources toward implementation of the CAT, the challenged SRO action has left SIFMA no alternative other than to file this legal proceeding in order to protect CAT data and ensure that those who maintain the data remain legally responsible for unauthorized exposure of sensitive information in the CAT system.

Related Documents

  1. SIFMA’s Application for Review of SRO Action That Violates Exchange Act Sections 19(d) and 19(f) (the “Application”)
  2. Declaration of Lorin L. Reisner In Support of SIFMA’s Application Pursuant To Exchange Act Sections 19(d) and 19(f)
  3. SIFMA’s Motion to Stay SRO Action Pending Commission Review of SIFMA’s Application Pursuant to Exchange Act Sections 19(d) and 19(f) and Incorporated Memorandum of Law
  4. Certificate of Compliance with Word Limit
  5. Notice of Appearance on Behalf of SIFMA
  6. Certificate of Service

See Also