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N. Third Party Reporting
This topic includes information related to the use of a third party to report data to CAT.
- FAQN7. If a firm uses a third party CAT Reporting Agent to submit data on its behalf, can the firm satisfy its CAT recordkeeping obligations by having the third party retain the data and provide it upon request?
Each Industry Member is responsible for complying with applicable CAT requirements, including those related to recordkeeping and record retention, set forth in the CAT Compliance Rules. Outsourcing a function to a vendor or other third party does not relieve the Industry Member of its ultimate responsibility for compliance with the CAT Compliance Rules or other applicable securities laws, rules or regulations (e.g., SEC Rule 17a-4).
- FAQN6. If an Industry Member introducing firm uses a third party service bureau’s system, such as an Order Management System, provided by its clearing firm and the third party service bureau transmits data to CAT on behalf of the introducing firm, must there be a reporting agreement between the introducing firm and third party vendor?
Yes, Industry Members must have individual reporting agreements with each firm or service bureau transmitting data to CAT on the Industry Member’s behalf. A reporting agreement between the Industry Member clearing firm and third party service bureau in this instance would not apply to the introducing Industry Member firm.
On Wednesday, January 8, 2020, at 2 pm ET, Consolidated Audit Trail, LLC and FINRA CAT, LLC will host a CAT 101 Industry Webinar. This Webinar is designed for Industry Members that may be new to, or less familiar with, CAT and will provide an introduction to the reporting requirements, timelines and mechanics of the Consolidated Audit Trail. The event will be held at 2 pm ET.Audio file
- FAQN5. Are Industry Members that report to CAT using a third-party vendor that submits reportable data to the CAT using a private line connection required to transmit their CAT reportable data to the third party vendor via a private line connection?
No. The connectivity standards in the CAT NMS Plan (i.e., Section 4.1.1 of Appendix D) only apply to connections directly into the CAT infrastructure. Although the connectivity standards in the CAT NMS Plan would not apply in this scenario, broker-dealers are encouraged to consider industry practices for connectivity designed to mitigate security and other risks.
- FAQN2. If one or more third parties (e.g., clearing firms) is used by an Industry Member to report data to CAT, who does the compliance obligation belong to if the third-party reporter is also a CAT Reporter?
Each Industry Member is responsible for the timeliness, accuracy and completeness of the data it is required to report to CAT regardless of who transmits the data to the CAT. Therefore, even if an Industry Member uses another CAT Reporter to report data on its behalf, the Industry Member remains fully responsible for the timeliness, accuracy and completeness of the data. Each Industry Member must have written procedures in place to ensure that the information reported by or on its behalf is timely, accurate, and complete.
- FAQN4. Are there any scenarios where an Industry Member can assume another CAT Reporter will report an order to CAT on its behalf absent any specific reporting agreement between the two CAT Reporters?
No. There are no scenarios where one CAT Reporter has an obligation to report orders on behalf of another Industry Member that uses its systems to route or execute orders. An agreement to use any third party for reporting to CAT must be agreed to by the two parties, evidenced in writing, and retained by both parties to the agreement. The agreement must specify the respective functions and responsibilities of each party. An Industry Member cannot assume that any third party will perform reporting on its behalf.
Yes. More than one third party may transmit order events to CAT on behalf of a single Industry Member. Industry Members are responsible for ensuring that all required information is submitted to CAT via the third parties, and that the third parties do not send duplicate information to CAT.
- FAQN1. Can CAT Reporting Agents report CAT Data to the CAT on behalf of an Industry Member without the Industry Member’s consent?
No, a CAT Reporting Agent may not report CAT Data to the CAT on behalf of an Industry Member without the Industry Member’s consent. As required in the CAT Compliance Rules, an Industry Member may enter into an agreement with a CAT Reporting Agent pursuant to which the CAT Reporting Agent agrees to fulfill the obligations of such Industry Member under the CAT Compliance Rules.