Shifting CAT costs onto broker-dealers and investors raises trading costs and weakens U.S. market competitiveness
WASHINGTON, D.C. – MFA urged the Securities and Exchange Commission (SEC) to assume full financial responsibility for the Consolidated Audit Trail (CAT) in a comment letter submitted today. The letter responds to the SEC’s review of the CAT funding model and recommends the Commission fund the system through its own appropriations rather than continue passing costs to broker-dealers and investors.
“Broker-dealers and investors are footing the bill for a regulatory system they do not use, did not design, and cannot control,” said Jennifer Han, MFA Chief Legal Officer. “Having the SEC fund the system it uses would align responsibility with control, incentivize cost discipline, and help keep trading costs low for investors, including pensions, foundations, and endowments.”
CAT costs have grown significantly beyond initial projections, with broker-dealers bearing most of the burden. Those costs are ultimately passed on to investors through higher trading costs and reduced market efficiency. Recent reforms have made incremental improvements but do not change the fact that the SEC has little incentive to rein in costs for a system broker-dealers pay for. The only fix is for the SEC to assume financial responsibility for the regulatory system it controls and relies on.
Read the full letter here.
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About the global alternative asset management industry
The global alternative asset management industry — including hedge funds, private credit funds, and hybrid funds — serves thousands of public and private pension funds, charitable endowments, foundations, and other global institutional investors. The industry provides portfolio diversification and risk-adjusted returns to help meet their funding obligations and return targets throughout the economic cycle.
About MFA
Managed Funds Association (MFA), based in Washington, D.C., New York City, Brussels, and London, represents the global alternative asset management industry. MFA’s mission is to advance the ability of alternative asset managers to raise capital, invest it, and generate returns for their beneficiaries. MFA advocates on behalf of its membership and convenes stakeholders to address global regulatory, operational, and business issues. MFA has more than 180 fund manager members, including traditional hedge funds, private credit funds, and hybrid funds, that employ a diverse set of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors diversify their investments, manage risk, and generate attractive returns throughout the economic cycle.
