In today’s evolving regulatory landscape, firms are under more intense scrutiny than ever before. The FINRA CAT has increased both the complexity and the stakes for broker-dealers responsible for large volumes of daily trade reporting. Ensuring that your Written Supervisory Procedures (WSPs) for CAT are “audit-ready” isn’t just a regulatory box to tick—it’s critical to safeguarding your firm against costly penalties and reputational risk. Yet even with robust compliance programs, firms consistently overlook several key areas.
Drawing from industry best practices and real-world experience, let’s break down the most commonly neglected focal points every compliance leader should revisit. And as we’ll see, adaptive RSMS platform is quickly becoming essential tools for closing the WSP gap.
Understanding the Stakes with FINRA CAT
The FINRA CAT system is one of the most important regulatory mechanisms introduced for the U.S. securities industry. It tracks orders throughout their lifecycle, providing an unprecedented level of transparency. But with this advancement comes vast new vulnerabilities, from data quality slips to delayed error corrections and regulatory inquiries.
A minor lapse in any aspect of CAT reporting can trigger extensive audits or even enforcement actions. WSPs are your first and best defense, but only if they address not just the obvious, but the nuanced and easily-missed compliance risks.
Key Areas Firms Often Overlook
1. Missing Out on Correct Reporting
Correctness is the cornerstone of CAT compliance. The CAT regulatory framework expects every data point—down to the smallest timestamp or identifier—to be both accurate and complete. Yet common oversights include:
- Failing to cross-verify CAT data against internal transaction logs.
- Overreliance on feeds without sufficient human review.
- Outdated mapping of trade event types, leading to systematic reporting errors.
Often, firms presume that the initial data integration works indefinitely. In reality, ongoing changes—from system upgrades to regulatory guidance updates—require regular testing and validation. Without a process to reconcile CAT reports back to the original books and records, errors can slip through and compound.
A cloud-based surveillance platform like RSMS delivers validation, cross-checking CAT submissions against source data and flagging discrepancies before filings are made. This ensures reports remain correct as your systems evolve and regulations change.
2. The Blind Spot of Incomplete Reporting
Regulators don’t just want the right data—they want all relevant data. FINRA CAT compliance means capturing every order, every route, and every execution, without gaps. Firms often overlook:
- Out-of-band transactions or manual deals that bypass tracking.
- Incomplete event lifecycle documentation (especially for order modifications or cancellations).
- Transactions involving third-party systems or external venues.
Failure to maintain comprehensive coverage can signal to auditors that WSPs lack depth or that compliance is not fully embedded in the firm’s processes.
RSMS provides a unified data repository, integrating feeds from multiple sources (FIX, CSV, and more) to guarantee nothing is missed. It also provides visual dashboards for compliance officers to monitor completeness at a glance.
3. Underestimating Deadlines and Late CAT Submissions
Timeliness is another recurring pitfall. FINRA CAT imposes strict daily deadlines for data submissions. Even a small delay—whether from a system outage or human error—can violate your WSPs and invite regulatory intervention.
Key timeliness challenges include:
- Delays in upstream data processing.
- Failure to identify reporting bottlenecks, especially during periods of peak volume.
- Lack of on-time alerts for failed or late submissions.
Relying on manual checks or post-hoc reconciliation leads to missed deadlines, opening the door to FINRA’s data quality review and potential penalties. After all, on-time reporting matters!
With RSMS, every step of the CAT reporting process is tracked and timestamped. Notifications alert compliance teams to transmission failures or approaching deadlines, so issues are addressed proactively—not after they’ve been cited by regulator
4. Dropping the Ball on Error Corrections
Even the best systems are not immune to occasional mistakes. Regulators expect not just initial accuracy, but also robust processes for identifying, correcting, and documenting errors. A superficial approach to error handling not only risks further compliance gaps, but also signals to auditors an unprepared or non-systematic operation.
Dangers here include:
- Overlooking error feedback due to inadequate monitoring.
- Slow or ad hoc correction cycles that propagate questions from regulators.
- Insufficient documentation of corrective actions for audit trail purposes.
A platform like RSMS goes beyond simple error correction—it streamlines exception detection, routes issues for resolution, and logs each fix for audit review. This creates a transparent and easily reviewable record, essential for passing a FINRA or SEC exam.
5. Mishandling Regulatory Inquiries When It Counts
Finally, no matter how robust your procedures, your firm will eventually field regulatory questions—from routine reviews to sudden enforcement actions. A common shortfall is:
- Lack of readiness to furnish records promptly or explain exceptions.
- Disorganized documentation, making response to FINRA CAT inquiries laborious and error-prone.
- Incomplete linkage between supervisory review and supporting data.
The inability to respond effectively—whether due to lost records or unclear procedures—can escalate a simple inquiry into an enforcement scenario.
RSMS enables firms to instantly retrieve all CAT-related data, including exception handling and supervisory decisions. Intuitive dashboards offer bird’s-eye and granular views, while robust documentation and case management features ensure regulators’ questions are answered quickly and completely.
Why Overlooking These Areas is Costly
The consequences of inadequate CAT WSPs are increasingly severe. Firms that miss any of these core areas face:
- Reputational damage, penalties for late, incomplete, or inaccurate reporting.
- Intensive audits or regulatory exams.
- Loss of client confidence.
- Increased compliance costs as reactive fixes replace systematic controls.
Ultimately, regulators view your CAT WSPs as a reflection of your overall compliance culture. Overlooked areas aren’t seen as minor gaps—they’re warnings that greater risks may lurk undetected.
Take The RSMS Advantage: Future-Proofing Your CAT WSPs
Staying compliant with FINRA CAT is not a one-time project—it’s an ongoing, evolving responsibility. Regulatory expectations will continue to grow, making it crucial to maintain adaptive, thorough, and “audit-ready” WSPs. RSMS by Capital Market Solutions stands out as a leading cloud-based regtech platform designed to keep your CAT WSPs not just audit-ready, but audit-proof.
Take the guesswork out of audit-readiness—empower your compliance team with RSMS and ensure your CAT WSPs remain ready for whatever challenge comes next. Minimize risk, maximize confidence—with compliance workflows built to scale. Because when the audit comes, preparation is everything.
Ready to secure your CAT compliance future? Learn more about RSMS and how it can revolutionize your CAT compliance.