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SEC on Course to Fix ‘Worst Executed’ Audit Trail, Clayton Says

Nov. 19, 2019, 4:10 PM

A massive market-surveillance database that safeguards personal information is on a path toward completion after years of delays, according to SEC Chairman Jay Clayton.

The Securities and Exchange Commission is moving “full steam ahead” to get the Consolidated Audit Trail done and resolve concerns about the collection of personal information and other issues by 2022, Clayton said Nov. 19 in Washington.

The SEC has received calls from Congress, brokers, and stock exchanges to keep some personal information out of the database, also known as the CAT. The exchanges and the Financial Industry Regulatory Authority, which are creating the CAT at the behest of the commission, asked the agency to exclude social security numbers and dates of birth from the system in October.

Clayton has been receptive to potentially keeping social security numbers and dates of birth out of the CAT. The commission can do its surveillance job with only “phone book information” in the database, he said at the Securities Industry and Financial Markets Association’s annual meeting. (Bloomberg Law parent Bloomberg LP is an associate member of SIFMA, which advocates for brokers.)

“We’re not taking any of it unless we believe that we can protect it, and we’re going to minimize what we do take at the end of the day,” he said.

The project has faced several delays since the SEC first proposed it in 2010 following that year’s Flash Crash, which roiled financial markets. Large brokers would have to begin submitting data to the system by April 2020, with its full implementation scheduled for 2022, according to the agency’s latest plan.

“This was one of the worst conceived, worst executed projects I’ve seen, and I’ve seen a few,” Clayton said. But “we’re back on track.”

To contact the reporter on this story: Andrew Ramonas in Washington at aramonas@bloomberglaw.com

To contact the editors responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com; Seth Stern at sstern@bloomberglaw.com