Reporting to the Consolidated Audit Trail (CAT)

APR 19, 2022 | PRACTUS LLP

Reporting to the Consolidated Audit Trail (CAT)

Authored by Ryan P. Smith

MENOs and MEORs and MEOFs, Oh My! – A High-Level Overview of CAT Reporting

The Consolidated Audit Trail (CAT) is the biggest change – and many would offer, challenge – to regulatory reporting in the broker-dealer industry in some time.  Perhaps ever.  Accurate reporting requires a blend of regulatory expertise and technical skill to successfully translate the sequence of actions in a securities transaction into the events that need to be reported to the CAT.  MENOs and MEORs and MEOFs, indeed.

All industry members, including entities registered as a broker-dealer and a registered investment adviser, must report to the CAT.1 Although an industry member can use a reporting agent to help it discharge this obligation, at the end of the day, it remains responsible for ensuring that it reports complete and accurate information.  FINRA regularly updates several resources to help industry members meet this requirement.  The Industry Member Reporting Scenarios documents help industry members understand what transaction and customer account information they need to report to the CAT and to the Customer and Account Information System (CAIS), respectively.  The Technical Specifications documents guide industry members on how to report this information.  FINRA also posts various FAQs and hosts regular informational calls to supplement these resources.

While the industry is preparing to meet the Phase 2e deadline later this summer – at which time, it must report a significant amount of additional customer information to the CAIS – FINRA’s guidance continues.  FINRA just updated CAT Alert 2020-04 and the related Self-Reporting Erroneous Events Form, which provides information on when and how to self-report erroneously reported events and other data errors that are not identified in the regular reporting process.  It is worth noting that industry members do not have to self-report errors, and self-reporting is not an absolute defense to potential liability under the applicable FINRA rules.2 Rather, it is a potential mitigating factor.3

In addition, FINRA noted during its March 16 Monthly CAT Update that, among other things, it updated the Reporting Scenarios document (now at Version 4.9).  I find that regularly reviewing the redlined versions of this document (as well as the Technical Specifications document, which FINRA updated on March 25) is critical to stay informed of changes to CAT reporting.  Attending FINRA’s calls and analyzing updates that FINRA posts via e-mail or RSS feed are also very helpful tools.  If your firm is an industry member, then it is vitally important to remain current on CAT requirements – even if your firm uses a reporting agent.  I welcome you to contact me if you have any questions about how CAT requirements may impact your firm.

Thank you for reading this post.  Please know that I wrote it for informational purposes only (some may consider it ADVERTISING MATERIAL) and did not intend for it to be legal advice or to form an attorney-client relationship with you – especially in jurisdictions where I am not licensed to practice law.  I encourage you to seek your own counsel to help you with your specific situation.  To that end, I invite you to contact me if you would like to discuss my services.

Ryan Smith is a Financial Services & Alternate Dispute Resolutions partner of Practus, LLP and based in the Washington, D.C. area.  His practice focuses on helping broker-dealers, registered investment advisers and their associates address a wide range of legal and compliance issues.

The Authors
Ryan P. Smith
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Practus, LLP provides this information as a service to clients and others for educational purposes only. It should not be construed or relied on as legal advice or to create an attorney-client relationship. Readers should not act upon this information without seeking advice from professional advisers.

  1.  See, e.g., CAT FAQ B14.
  2.  See CAT Alert 2020-04 at fn. 1. 
  3.  Id.; see also FINRA Rule 6800 et seq.
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