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SEC Proposes Consolidated Audit Trail

By Harvard Law School Program on Corporate Governance

The Securities and Exchange Commission (the ?SEC?) recently proposed to require the Financial Industry Regulatory Authority and the national securities exchanges (collectively, the ?SROs?) to adopt a plan (the ?Plan?) for the development, implementation and maintenance of a consolidated audit trail (?CAT?) for the listed equities and options markets.

The SEC?s proposal would set in motion a vast, multi-year project that would culminate in the creation of a comprehensive, real time data repository for all information concerning orders and executions. This repository would permit the SEC and the SROs the ability to query and analyze in real time all trading activity in covered securities. The CAT would ultimately revolutionize securities surveillance and enforcement by eliminating many of the delays and much of the imprecision resulting from the disparate, unlinked and in many cases manual processes that currently exist. However, the SEC?s proposal would place on the SROs a very significant cost and burden of developing and operating the industry utility that will be the core of the CAT, retooling current surveillance methodologies and enforcing compliance by member broker-dealers. Broker-dealers also would have to shoulder considerable costs of compliance.

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Full post as published by The Harvard Law School Corporate Governance Blog on July 04, 2010 (boomark / email).