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SEC: Amendments to CAT NMS Plan & Small Entity Compliance Guide for RegBI & Form CRS

SEC Proposes Transparency and Financial Accountability Amendments to CAT NMS Plan

On September 9, the Securities and Exchange Commission voted to propose amendments to the national market system plan (CAT NMS Plan) governing the Consolidated Audit Trail (CAT).

The proposed amendments would require self-regulatory organizations that are participants in the CAT NMS Plan, such as FINRA and the national securities exchanges (SROs), to file and publish a complete implementation plan for the CAT and quarterly progress reports. Each of the required documents must be approved by the Operating Committee established by the CAT NMS Plan and submitted to the chief executive officer, president or equivalently situated senior officer of each participating self-regulatory organization. In addition, the proposed amendments would include financial accountability provisions that establish target deadlines for four implementation milestones and reduce the amount of fee recovery available to the participating self-regulatory organizations if those target deadlines are missed.

The public comment period will remain open for 45 days following publication of the proposed release in the Federal Register.

In a public statement released in conjunction with the proposed amendments, SEC Chairman Jay Clayton acknowledged that the SROs have not met the CAT NMS Plan deadlines for implementation of the CAT, explained that the proposed amendments are designed to facilitate implementation progress and assured that the protection of sensitive personal information submitted to the CAT would be a priority of the SEC and the SROs.

The SEC press release is available here.

A copy of SEC Chairman Jay Clayton’s statement on the proposed amendments is available here.

The proposed amendments are available here.

SEC Releases Small Entity Compliance Guide for Regulation Best Interest and Form CRS

On September 9, the Securities and Exchange Commission (SEC) released two small entity compliance guides to assist broker-dealers and investment advisers in complying with the recently adopted Regulation Best Interest (Reg BI) and Form CRS.

On June 5, the SEC adopted (1) Reg BI and (2) Form CRS and related rules under both the Investment Advisers Act of 1940 and the Securities Exchange Act of 1934 (Exchange Act). Reg BI establishes a new standard of conduct under the Exchange Act for broker-dealers and natural persons who are associated persons of a broker-dealer when making a recommendation of any securities transaction or investment strategy involving securities (including account recommendations) to a retail customer. Form CRS and its related rules require registered investment advisers and registered broker-dealers to deliver to retail investors a brief customer or client relationship summary that provides information about the firm, including costs, conflicts of interest and disciplinary history. Firms must file their relationship summaries with the SEC.

The guides summarize and explain Reg BI and Form CRS and also inform small entities of the SEC’s Division of Investment Management and Division of Trading and Markets availability to assist with questions regarding Reg BI, Form CRS or relating to the package of rules and interpretations adopted in connection therewith.

A copy of the guide for Reg BI is available here.

A copy of the guide for Form CRS is available here.

©2020 Katten Muchin Rosenman LLP


About this Author

Susan Light, Katten Law Firm, Finance Law Attorney, New York

Susan Light focuses her practice on financial services regulatory matters. She counsels broker-dealers, hedge funds, investment banks and financial services clients on enforcement issues involving the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), other self-regulatory organizations (SROs) and state and federal regulatory authorities. She has particular experience related to sales practice issues, financial and operational issues, anti-money laundering, crowdfunding, cybersecurity, and cryptocurrencies.

Michael T. Foley, Katten, Lawyer, Finance, FINRA, Chicago
Special Counsel

Michael Foley represents broker-dealers, investment advisers and other financial services industry participants with respect to a broad spectrum of legal and regulatory matters arising under the federal securities laws.

Michael has nearly 20 years of experience in private practice and in-house at both a large, full-service broker-dealer and at an online discount broker-dealer, advising broker-dealers and other financial institutions regarding compliance with the federal securities and commodities laws, and with the regulations of the US Securities and Exchange Commission, the US Commodity Futures Trading Commission and financial industry self-regulatory organizations. 


Adam Haft is an associate in the Financial Services practice.

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