Tag Archives : Regulatory compliance monitoring

May 20, 2026 - blog

7 Critical CAT Reporting Failures That Raise Red Flags for Regulators

If you’re a broker-dealer, CAT reporting isn’t just a checkbox on your compliance list; it’s one of the most closely watched regulatory obligations you have. The Consolidated Audit Trail, or CAT, was built to give regulators a comprehensive view of trading activity across U.S. markets. And FINRA CAT oversight means that how accurately and consistently you report matters more than ever. Here’s the thing: regulators aren’t just looking for blatant violations. They’re looking at patterns, late submissions, unfixed errors, and missing records. Even small, recurring gaps can signal that your compliance infrastructure isn’t where it needs to be. Let’s break down 7 critical CAT reporting failures that catch regulators’ attention, and more importantly, what you can do about them. 1. Incomplete Submission of Reportable Events What it is: Not all orders, quotes, or trade events are being submitted to the CAT system as required. Why it’s a problem: Every reportable event, from order to execution, needs to be captured. When submissions are incomplete, regulators see gaps in the audit trail that should be seamless. The risk: Incomplete data raises immediate questions about whether your firm has full visibility into its own trading activity. It can trigger deeper reviews and examinations. The fix: Regular internal reconciliation is key, need a tool that supports strong reconciliation and comparative review practices. 2. Failure to Repair Errors Timely What it is: Errors are identified in your CAT submissions, but aren’t corrected within the required timeframe. Why it’s a problem: CAT reporting has strict error repair windows. Missing these windows, even if you eventually fix the errors, shows regulators that your process lacks urgency and discipline. The risk: Repeated late repairs can result in increased scrutiny in future examinations. The fix: Build a repair workflow with clear ownership and deadlines, not just detection, what you need is a tool that receives and processes feedback, supports easy and powerful corrections mechanism, maintains status and audit trail. 3. Failure to Submit Corrections What it is: Errors are identified, internally or through FINRA feedback, but corrections are never submitted at all. Why it’s a problem: This is different from late repairs. Not submitting corrections means the inaccurate data stays on record and reflects on the FINRA report card, which directly undermines the integrity of the reporting itself. The risk: Regulators view uncorrected errors as a sign of either negligence or a broken process, neither is a good look. The fix: If your team knows about an error and doesn’t act on it, that’s a compliance failure on two levels: the original error and the failure to correct it. Make sure your error management workflow closes the loop every time. Again smarter tool makes life easier in taking control of errors. 4. Not Implementing an Accuracy Review What it is: Your firm submits CAT data but has no formal process in place to verify that what was submitted is actually accurate. Why it’s a problem: Submission without validation is like filing a tax return without checking the numbers. Regulators expect firms to have a structured accuracy review process, not just a “submit and hope” approach. The risk: Without ongoing accuracy checks, errors can accumulate unnoticed, making your compliance posture increasingly fragile. The fix: Implement regular internal review cycles, daily, weekly, or monthly, depending on volume, that compare submitted data against source records. This is where a dedicated regtech for CAT compliance, like RSMS, can make a meaningful difference by flagging discrepancies before they become regulatory issues. Intelligent Compliance tools like RSMS can do periodic auditing and comparative reviews. 5. Inaccurate or Incomplete Reporting of CAT Orders What it is: Orders are submitted, but the data itself contains errors: wrong timestamps, incorrect order types, missing identifiers, or incomplete lifecycle events. Why it’s a problem: The CAT system is only as valuable as the data that goes into it. Inaccurate order data defeats the entire purpose of regulatory transparency. The risk: This is one of the most direct triggers for regulatory action. Patterns of inaccurate data suggest systemic problems in how your firm captures and transmits trading information. The fix: Common culprits include manual data entry errors and integration mismatches between order management systems and CAT reporting feeds. Audit your data pipelines regularly.Stronger recon procedures with smart tools wins the day and always! 6. Not Establishing and Maintaining Reasonable WSPs What it is: Written Supervisory Procedures (WSPs) related to CAT reporting either don’t exist, are outdated, or don’t reflect how reporting is actually done. Why it’s a problem: WSPs are the backbone of your compliance program. They tell regulators, and your own team how things should work. If they’re missing or vague, it signals a lack of intentional compliance design. The risk: During an audit, if your WSPs don’t align with your actual practices, that gap alone can be a finding. Regulators want to see documented, enforceable procedures. The fix: WSPs for CAT reporting should be living documents. Update them whenever your reporting processes change, and make sure they’re specific enough to actually guide your team’s day-to-day actions. 7. Not Maintaining Underlying Books and Records What it is: Your firm can’t produce the source records that support what was reported to CAT, or those records are incomplete, inconsistent, or inaccessible. Why it’s a problem: CAT compliance doesn’t exist in isolation. Regulators can and do request the underlying books and records behind your submissions. If those records don’t match or can’t be produced, it creates serious problems. The risk: Failure to maintain records isn’t just a CAT issue; it can trigger broader recordkeeping violations with significant consequences. Practical insight: Make sure your data retention policies align with CAT-related requirements and that source records are stored in a way that’s organized, retrievable, and consistent with what’s been reported. Trust RSMS for seamless CAT data management. Need tools that provide insights into regulatory reports and books and records in single cohesive system. Move from Reactive to Proactive CAT Compliance CAT reporting compliance isn’t about getting every single submission perfect. It’s about having the