Tags: CAT

Open Call Report – New FINRA Exam Process

In July 2017 the SEC approved FINRA’s proposed rule change to streamline competency exams and expand opportunities for prospective securities professionals

STA Open Call – November 29, 2017 – Call Notes
“New FINRA Exam Process”
Presenter: Joe McDonald, Senior Director Exams & Continuing Education FINRA

Opening Remarks – Jim Toes, STA President & CEO
Senate Tax Bill – The Senate Finance Committee passed a comprehensive tax reform bill. The bill is now being debated by the full Senate. One item of particular concern to STA is a provision that would generally require taxpayers to use a FIFO cost basis on the sale of securities. We published a bulletin publicly and to Hill Staff voicing our objection. link

SEC Commissioner Nominees Update – Nominees for the two (2) SEC Commissioner Positions; Hester Peirce and Robert Jackson received approval from the Senate Banking Committee. They now await approval from the full Senate. Unfortunately, we do not expect this to happen this year.

House Fin’l Services Subcommittee Hearing on CAT – The House Financial Services Committee will be
holding a hearing titled “Implementation and Cybersecurity Protocols of the Consolidated Audit Trail” on November 30th at 10am. Among those testifying will be, Mike Beller, CEO of Thesys Technologies and Chris Concannon, President & COO of Cboe. link

Open Call Summary
In July, 2017 the SEC approved FINRA’s proposed rule change to streamline competency exams and expand opportunities for prospective securities professionals seeking to enter or re-enter the securities
industry. The proposal is a combination of consolidating certain registration rules and restructuring the representative-level qualification examinations by creating a general knowledge examination called the
Securities Industry Essentials (SIE). The SIE is a new, introductory-level FINRA exam for prospective securities industry professionals. The SIE assesses a candidate’s knowledge of basic securities industry information and upon passing is valid for four years. Association with a firm is not required to take the SIE however passing it alone does not qualify an individual to engage in the securities business. Individuals, who do pass the SIE and are then sponsored by a FINRA member firm, need only to take an abridged version of a qualification exam (such as the Series 7). These changes become effective Oct 1, 2018. Please refer to the below links for additional informational on the proposal and how to make a direct inquiry to Joe McDonald.

SEC Approves FINRA Exam and Continuing Education Requirement link

FINRA Securities Industry Essentials Exam, “SIE” link

This brief is meant for informational purposes only and therefore should not be considered legal advice. STA’s goal is to raise awareness and encourage industry dialogue.

House Financial Services Committee Hearing

House Financial Services Committee Hearing
“Implementation and Cybersecurity Protocols of the Consolidated Audit Trail”
The hearing will examine the status of the CAT’s implementation and the current adequacy of existing data security protections regarding the storage and use of CAT data by entities that are part of the CAT operating committee, the CAT plan processor, and the SEC. It also will examine whether additional cybersecurity protocols are necessary to properly safeguard collected data, including personally identifiable information (PII). More details here
See STA’s November Newsletter here

Comment Letter: CAT NMS Implementation Plan

The Security Traders Association (“STA”) appreciates the opportunity to offer comments to the Thesys CAT, LLC and the Operating Committee on the DRAFT CAT Reporting Technical Specifications for Industry Members (“Discussion Document”), distributed to the industry on September 7, 2017. In addition to representing the interests of our members on matters relating to the CAT NMS Plan, STA is also a member on the Financial Information Forum (“FIF”) Consolidated Audit Trail Working Group (“FIF CAT WG”).

See full letter here

Falling-back is not failure, not even with CAT

In the military, falling-back happens all the time and for good reasons – none of which equate to quitting or failure. Rather, falling-back is viewed as a sound response to a dangerous situation and as a means to achieving victory. Don’t believe me? Well, listen to one of STA’s favorite decorated war heroes, Jason Redman who, among his many achievements, speaks before business leaders on strategies that work well on both the battlefield and in business. Distinguishing between falling-back and quitting or failure is one such lesson. As Jason points out, falling-back provides an opportunity to reevaluate a situation, to regroup into a more powerful force and then finally, reengage from a position of strength.
Unfortunately, our industry doesn’t do falling-back well. We tend to deploy a pendulum strategy that takes something to the point where it breaks, we then pivot and go twice as fast to the other apex only to break something else. This pendulum reality can be found in our individual behavior; our firms, as seen by countless instances of talented people promoted to points of failure only to be let go; and in our regulatory reporting regimes that throttle between too much and too little. Yes, we as an industry don’t do falling-back well.
On November 15, 2016 and after more than four years of dialogue with the industry, the SEC approved the highly anticipated Consolidated Audit Trail National Market System Plan better known as CAT. This pinnacle moment set in motion a series of deadlines for building and implementing what will be the largest data warehouse in the financial services industry. Phase #1, which calls for the SROs to begin submitting required data to the CAT is weeks away and Phase #2 is November 2018 when most broker-dealers will have to begin reporting. Technical specifications detailing how and what the industry needs to report are being delivered to market participants and multiple industry efforts are in place to assist in the implementation of CAT. We are at that point where the metaphorical ‘devil is in the details’ is fully exposed.
Concerns on CAT’s implementation plan are many, with some calling for a major scale back on its scope and others seeking time delays coupled with a more phased-in approach. Adding complexity to the already stressful environment under which the industry is operating, are the ever-increasing reports of cyber-attacks. STA, along with other industry groups believe there are problems with the current implementation plan and a solution needs to be more robust than requesting extensions to existing deadlines. We need the military equivalent of a fall-back strategy and now is the time to do it.
The selection of Thesys CAT to build the CAT was another pinnacle moment that occurred in January 2017. This decision, by definition surprised the industry as FINRA was the expected winner. Regardless of whether you think Thesys CAT is the right or wrong choice, the decision has been made and having this clarity affords the industry an opportunity to revisit the implementation plan without risking that CAT never gets built. Thesys CAT now owns this project and as such, has accountability and an economic interest in seeing CAT gets built. These factors place a stronger foundation under CAT that can withstand a temporary fall-back that has benefits as well.  To be clear, STA is not advocating CAT never be built. We are saying that at this junction falling-back is a better next step because moving forward is too dangerous and doing it now, will allow us to reevaluate, regroup and reengage from a position of strength.
Thank you, Jason.
Jason Redman
JR Overcome Show

STA Comment Letter on CAT

“The development of the Consolidated Audit Trail will represent an unprecedented opportunity to improve the Commission’s ability to surveil the market. It is critical to have an informed and detailed understanding of order and trade processing to design a system that is capable of achieving the objectives of CAT”

Read full comment letter (PDF) >