SEC Chairman Proposes Restructuring Securities Regulation Surveillance System CAT: Exploring SEC Takeover and Funding Mechanism Reform

Odaily News - U.S. Securities and Exchange Commission (SEC) Chairman Paul S. Atkins has sent a letter to Robert Walley, Chairman of the Operating Committee of the Consolidated Audit Trail (CAT), stating that the SEC plans to carry out a comprehensive reform of the CAT system, including adjustments to its governance structure, funding sources, and operational model.

Atkins stated that during his tenure, the SEC has significantly reduced CAT's annual operating costs by issuing exemptions and approving amendments to the CAT NMS Plan, and has eliminated the requirement to report personally identifiable information (PII) to the CAT system. These reforms have lowered system costs and narrowed the scope of data collection, but CAT still faces fundamental issues regarding costs, governance, and funding mechanisms.

To address these issues, the SEC issued a concept release on April 16, 2026, launching a comprehensive review of CAT as well as other audit trail systems and data sources used in U.S. securities market regulation. The SEC said it has received hundreds of comment letters, with one core consensus emerging: investors and market participants want the SEC to assume greater responsibility in CAT management and funding arrangements. Atkins stated that he has directed SEC staff to propose in-depth reform options for CAT, including:

1. Exploring new funding sources for CAT, including the use of congressional appropriations and Section 31 transaction fees under the Securities Exchange Act;

2. Drafting rule proposals that, if approved, would rescind Rule 613 and require exchanges, FINRA, and broker-dealers to continue leveraging existing CAT infrastructure and reporting standards to submit CAT data directly to the SEC or its designated entity;

3. Assessing the SEC's internal resource needs to prepare for the SEC to assume CAT governance responsibilities in the future.

The SEC expects that this reform involves multiple components that need to proceed in parallel, with the overall transition potentially extending until the end of 2027.