FINRA reminded member firms of their supervisory responsibilities under FINRA Rule 3110 ("Supervision") and the FINRA Rule 6800 Series ("Consolidated Audit Trail Compliance Rule").
In a Regulatory Notice, FINRA advised member firms that receive or originate orders in NMS stocks, OTC equity securities or listed options of their responsibility to report to the Consolidated Audit Trail ("CAT"). FINRA stated that reasonably designed and well-implemented supervisory procedures as to CAT rules should (i) identify by name or title the individual tasked with the review of CAT reporting, (ii) provide details regarding the type of reviews that will take place, (iii) state when the reviews will be done and (iv) explain how the reviews will be documented. FINRA also noted that (i) a firm's written supervisory procedures should address clock synchronization (e.g., daily clock synchronization each business day before markets open) and CAT reporting, and (ii) the obligation for CAT reporting cannot be delegated to a third party.
Additionally, FINRA provided firms with (i) recommended steps for ensuring that data reported to the CAT is complete, accurate and timely, and (ii) examples of common Order Audit Trail System supervisory deficiencies.
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