The SEC disapproved proposed amendments to the National Market System Plan Governing the Consolidated Audit Trail ("CAT"). The proposed amendments were filed by CAT LLC on behalf of various self-regulatory organizations ("SROs"). The amendments would have provided for limited liability to industry members reporting to the CAT, and limited the liability of the Operating Committee and its participants in the case of a systems breach or misuse.
In its Order, the SEC stated that CAT LLC did not meet its burden of demonstrating that the proposal is consistent with the Exchange Act. The SEC considered, among other things, comments on:
- how the proposal would affect industry members' incentives versus CAT LLC's with respect to investing in cybersecurity, risk mitigation procedures, and cyber insurance;
- whether SROs should have limited liability by contract because they have immunity when acting as regulators; and
- CAT LLC's focus on external breaches and its failure to address the potential for internal misuse or negligence by its personnel.
Relatedly, SIFMA released a statement in support of the SEC's disapproval of the proposed limited liability provision.
Primary Sources
- SEC Order: Joint Industry Plan; Order Disapproving an Amendment to the National Market System Plan Governing the Consolidated Audit Trail
- SIFMA Press Release: SIFMA Statement on SEC Disapproval of CAT Limitation of Liability Proposal
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