FINRA Reminds Firms of Their Supervisory Responsibilities Relating to CAT

September 9th | 2020

FINRA recently issued Regulatory Notice 20-31 as part of its continuing efforts to provide members with guidance on requirements relating to the Consolidated Audit Trail (CAT), and FINRA Rule 6800 Series (the “CAT Rules”). In particular, FINRA is reminding members of their supervisory responsibilities under the CAT Rules and FINRA’s Supervision Rule (Rule 3110). The notice cites specific considerations for CAT supervisory systems and procedures and recommends several steps that members should consider incorporating into their CAT supervisory systems and written supervisory procedures.

According to the notice, reasonably designed written supervisory procedures should address the CAT Rules and, at a minimum: (1) identify the individual, by name or title, responsible for the review of CAT reporting; (2) describe specifically what type of review(s) will be conducted; (3) specify how often the review(s) will be conducted; and (4) describe how the review(s) will be evidenced. Written procedures should also address clock synchronization, which should cover, at a minimum, how and when clocks are synchronized, who is responsible for clock synchronization, how the firm evidences that clocks have been synchronized, and how the firm will self-report clock synchronization violations, consistent with the clock synchronization guidance available on the CAT NMS Plan website.

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