FINRA CAT, CAIS & Consolidated Audit Trail (CAT) Compliance: The Ultimate Guide for Broker-Dealers

 In today’s regulatory environment, broker-dealers face increasing pressure to ensure accuracy, timeliness, and completeness in regulatory reporting. Two of the most critical components of this regime are FINRA CAT and CAIS (Customer and Account Information System) reporting — both of which fall under the broader Consolidated Audit Trail (CAT) compliance framework. Understanding these requirements is essential for firms aiming to reduce regulatory risk and enhance operational resilience.

At Capital Market Solutions, we help financial firms navigate the complexity of CAT reporting with confidence and rigor. Our solutions are designed to streamline compliance through automation, validation, and robust data governance. Capital Market Solutions

What Is the Consolidated Audit Trail (CAT)?

The Consolidated Audit Trail (CAT) is a comprehensive data repository and reporting system created under SEC Rule 613 (Regulation NMS) that captures detailed order and trade information across U.S. equity and options markets.

CAT collects and consolidates:

  • Every order origination and execution event
  • Modifications, cancellations, and routing
  • Time-stamped order lifecycle data
    These data points allow regulators to reconstruct market events from start to finish with precision, enhancing surveillance and market integrity.

Under FINRA’s implementation of Rule 613, member firms must submit their CAT data accurately and on time — without exemptions for firm size or trading strategy.

FINRA CAT: Regulatory Reporting Obligations

FINRA CAT refers to the CAT reporting obligations that all FINRA member firms must fulfill. These require firms that handle or originate orders in NMS stocks, OTC equity securities, or listed options to report to the CAT central repository.

Key points include:

  • Reportable Events: All order events, including new orders, executions, modifications, and cancellations
  • Timeliness: Data must be submitted promptly and accurately
  • Supervision: Firms must implement written supervisory procedures (WSPs) to ensure data integrity
  • Clock Synchronization: Time stamps must be synchronized to strict standards
    Failure to comply — such as late submissions, incomplete or inaccurate data, or weak supervision — can lead to regulatory inquiries and enforcement actions.

What Is CAIS (Customer and Account Information System)?

CAIS complements CAT reporting by ensuring that customer and account information aligns with the order and trade data submitted to CAT. It includes details about account holders, account types, and customer identifiers — all of which are essential for accurately linking orders to specific accounts.

Recent regulatory updates have refined CAIS reporting requirements, including exemptions and proposed amendments affecting customer information reporting standards.


Compliance with CAIS is not optional — it’s an integral part of the overall CAT framework and a common area of scrutiny in regulatory exams.

Why CAT & CAIS Compliance Matters

CAT and CAIS are far more than technical filing requirements. They are foundational to how regulators monitor the markets and enforce fair practices. Here’s why compliance is essential:

1. Enables Complete Market Surveillance

CAT gives regulators the power to trace orders across markets in real time, improving oversight and reducing opportunities for fraud, manipulation, or market abuse. SEC

2. Supports Regulatory Inquiries & Audits

Inaccurate or delayed reporting can trigger examinations, corrective actions, or sanctions, making rigorous compliance a must for broker-dealers. FINRA

3. Reduces Operational Risk

Proper CAT and CAIS procedures enhance data governance, reduce manual errors, and improve auditability within the firm.

4. Improves Internal Controls

Written Supervisory Procedures (WSPs), reconciliation processes, and error correction workflows help firms avoid common compliance gaps. FINRA

Common CAT Compliance Challenges

Despite well-defined rules, firms often struggle with:

  • Incomplete Data Submission: Missing events, inaccurate timestamps, or mismatches in data fields
  • Late Corrections: Errors not fixed within required windows
  • Weak Supervision: Lack of robust oversight of third-party reporting agents or internal data flows
  • CAIS Data Issues: Inconsistencies in customer information or improper hashing of customer identifiers
  • Clock Synchronization Failures: Business clocks not aligned within regulatory tolerances
    These challenges can increase regulatory risk and impact reporting quality. FINRA

Best Practices for CAT & CAIS Compliance

To remain compliant and reduce risk, firms should adopt proven best practices:

1. Implement Strong Written Supervisory Procedures (WSPs)

Ensure WSPs clearly define responsibilities, review processes, and escalation paths related to CAT and CAIS. FINRA

2. Conduct Daily Reconciliation & Validation

Compare reported CAT events against internal order and trade data from OMS/EMS systems to catch discrepancies early.

3. Automate Workflows

Leverage automated tools to collect, validate, and submit CAT and CAIS data to reduce manual errors.

4. Perform Regular Internal Audits

Scheduled reviews of CAT reporting quality and supervisory controls help maintain compliance readiness.

5. Monitor Regulatory Updates

Stay current with changes to Rule 613, CAIS amendments, and FINRA notices to adapt compliance processes.

How Capital Market Solutions Helps With CAT Compliance

At Capital Market Solutions, we understand the technical and operational complexity of CAT and CAIS compliance. Our RSMS (Regulatory Submission Management System) platform offers:

  • Centralised CAT & CAIS reporting automation
  • Data validation and exception management
  • Reconciliation with source systems (OMS/EMS)
  • Comprehensive audit trails
  • Case management and documentation features
    This cloud-based solution helps firms streamline reporting, reduce risk, and stay audit-ready — all while freeing up valuable internal resources for strategic tasks. Capital Market Solutions

Comments

Post a Comment

Popular posts from this blog

How Cloud-Based RegTech Is Reshaping FINRA CAT and CAIS Compliance in Financial Markets

Image
  Introduction As regulatory requirements continue to tighten in the financial services industry, firms are turning to  cloud-based solutions  to manage complex reporting mandates. From  FINRA CAT  to  CAIS compliance , cloud-native RegTech platforms are changing the game for broker-dealers, clearing firms, and asset managers. Tools like  Regulatory Surveillance and Management Systems (RSMS)  and platforms such as  CAIS-Connect  are enabling scalable, secure, and efficient compliance — without overwhelming internal teams. Why Cloud Matters in Regulatory Reporting Traditional compliance systems often rely on fragmented infrastructure and outdated manual processes. Cloud-based solutions, on the other hand, offer: Real-time scalability Automated reporting workflows Secure and centralized data access Regulatory updates without downtime These features are crucial in managing data-intensive regulations like  Consolidated Audit Trail (CAT)...
Read more

Navigating the Complexities of FINRA's Consolidated Audit Trail (CAT) Compliance

Image
In today's rapidly evolving financial landscape, regulatory compliance has become more intricate than ever. The Financial Industry Regulatory Authority (FINRA) introduced the Consolidated Audit Trail (CAT) to enhance market transparency and oversight. While its objectives are clear, the path to seamless compliance is fraught with challenges for many firms. For a comprehensive understanding of the Consolidated Audit Trail and its implications, refer to the official FINRA CAT page. Understanding the CAT Mandate Established in response to the 2010 "flash crash," the CAT system aims to provide regulators with a unified view of trading activities across U.S. equity and options markets. By capturing detailed information on orders, executions, and cancellations, CAT seeks to identify and mitigate market anomalies more effectively. Challenges in CAT Reporting While the intent behind CAT is commendable, firms often grapple with several challenges in their compliance journey: Data ...
Read more

Mastering Consolidated Audit Trail (CAT) Compliance: A Strategic Imperative for Financial Firms

Image
  In recent years, the U.S. financial industry has faced an intensifying push for transparency, driven by an increasing demand from regulators and investors to better understand how orders move through complex market systems. One of the most significant efforts in this regulatory evolution is the creation and ongoing expansion of the  Consolidated Audit Trail , or CAT. Born out of SEC Rule 613, CAT is a centralized database designed to capture a complete view of order and trade activity across all U.S. equity and options markets. It is the most ambitious market surveillance initiative ever undertaken in the country, both in terms of scale and the depth of information it collects. At its core, the purpose of the Consolidated Audit Trail is to empower the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority ( FINRA ) with the tools they need to monitor market activity more effectively. By capturing detailed data for every order — from the mome...
Read more