Common use of Customer and Customer Account Information Clause in Contracts

Customer and Customer Account Information. In addition to the submission of order and trade data, broker-dealer CAT Reporters must also submit customer information to the CAT so that the order and trade data can be matched to the specific customer.25 SEC Rule 613(c)(7) sets forth data recording and reporting requirements that must be included in the CAT NMS Plan. Under SEC Rule 613(c)(7)(i)(A), the CAT NMS Plan must require each CAT Reporter to record and report “Customer-ID(s) for each customer” when reporting to the CAT order receipt or origination information.26 When reporting the modification or cancellation of an order, the rule further requires the reporting of “the Customer-ID of the 19 RFP Question 49. 20 RFP Questions 59-60. 21 RFP Question 62. 22 RFP Question 63. 23 SEC Rule 613 and Sections 6.3 and 6.4 of the CAT NMS Plan permit certain other information to be reported by 8:00 a.m. Eastern Time on the Trading Day following the day the CAT Reporter receives the information. See SEC Rule 613(c)(4), (c)(7)(vi)-(viii). 24 SIFMA’s recommendations to the Participants regarding the CAT indicates support for the ability of Data Submitters to submit data in batch or near-real-time reporting. See SIFMA Recommendations, at 55. 25 As noted above, the term “customer” means “(i) [t]he account holder(s) of the account at a broker-dealer originating an order, and (ii) [a]ny person from whom the broker-dealer is authorized to accept trading instructions for such account, if different than the account holder(s).” SEC Rule 613(j)(3). 26 SEC Rule 613(c)(7)(i)(A). Person giving the modification or cancellation instruction.”27 In addition, SEC Rule 613(c)(8) mandates that all CAT Reporters “use the same Customer-ID . . . for each customer and broker-dealer.”28 For purposes of SEC Rule 613, “Customer-ID” means, “with respect to a customer, a code that uniquely identifies such customer for purposes of providing data to the central repository.”29 Also, SEC Rule 613(c)(7)(viii) requires that, for original receipt or origination of an order, CAT Reporters report “customer account information,” which is defined as including “account number, account type, customer type, date account opened, and large trader identifier (if applicable).”30 After considering the requirements of SEC Rule 613 with respect to recording and reporting Customer-IDs, Customer Account Information, and information of sufficient detail to identify the Customer as well as industry input and the Commission’s reasons for adopting these requirements, the Participants requested that Industry Members and other industry participants provide ideas on implementing the Customer-ID requirement. After careful consideration, including numerous discussions with the DAG, the Participants concluded that the CAT NMS Plan should use a reporting model that requires broker-dealers to provide detailed account and Customer information to the Central Repository, including the specific identities of all Customers associated with each account, and have the Central Repository correlate the Customer information across broker-dealers, assign a unique customer identifier to each Customer (i.e., the Customer-ID), and use that unique customer identifier consistently across all CAT Data (hereinafter, the “Customer Information Approach”). Under the Customer Information Approach, the CAT NMS Plan would require each broker-dealer to assign a unique Firm Designated ID to each customer, as that term is defined in SEC Rule 613. For the Firm Designated ID, broker-dealers would be permitted to use an account number or any other identifier defined by the firm, provided each identifier is unique across the firm for each business date (i.e., a single firm may not have multiple separate customers with the same identifier on any given date). Under the Customer Information Approach, broker-dealers must submit an initial set of customer information to the Central Repository, including, as applicable, the Firm Designated ID for the customer, name, address, date of birth, Individual Tax ID (“ITIN”)/social security number (“SSN”), individual’s role in the account (e.g., primary holder, joint holder, guardian, trustee, person with the power of attorney) and Legal Entity Identifier (“LEI”),31 and/or Large Trader ID (“LTID”), if applicable.32 Under the Customer Information Approach, broker-dealers would be required to submit to the Central Repository daily updates for 27 SEC Rule 613(c)(7)(iv)(F). 28 SEC Rule 613(c)(8). 29 SEC Rule 613(j)(5). 30 SEC Rule 613(j)(4). 31 Where a validated LEI is available for a Customer or entity, it may obviate the need to report other identifier information (e.g., Customer name, address). 32 The Participants anticipate that Customer information that is initially reported to the CAT could be limited to only customer accounts that have, or are expected to have, CAT-reportable activity. For example, accounts that are considered open, but have not traded Eligible Securities in a given timeframe may not need to be pre-established in the CAT, but rather could be reported as part of daily updates after they have CAT-reportable activity. reactivated accounts, newly established or revised Firm Designated IDs, or associated reportable Customer information.33 Within the Central Repository, each Customer would be uniquely identified by identifiers or a combination of identifiers such as TIN/SSN, date of birth, and, as applicable, LEI and LTID. The Plan Processor would be required to use these unique identifiers to map orders to specific customers across all broker-dealers. Broker-dealers would therefore be required to report only Firm Designated ID information on each new order submitted to the Central Repository rather than the “Customer-ID” as set forth in SEC Rule 613(c)(7), and the Plan Processor would associate specific customers and their Customer-IDs with individual order events based on the reported Firm Designated ID. The Customer-ID approach is strongly supported by the industry as it believes that to do otherwise would interfere with existing business practices and risk leaking proprietary order and customer information into the market.34 To adopt such an approach, however, requires certain exemptions from the requirements of SEC Rule 613. Therefore, the Participants included the Customer Information Approach in the Exemptive Request Letters so that this approach could be included in the CAT NMS Plan. In addition to the approach described above, the CAT NMS Plan details a number of requirements which the Plan Processor must meet regarding Customer and Customer Account Information. The Plan Processor must maintain information of sufficient detail to uniquely and consistently identify each Customer across all CAT Reporters, and associated accounts from each CAT Reporter. The Plan Processor must document and publish, with the approval of the Operating Committee, the minimum list of attributes to be captured to maintain this association. The CAT Processor must maintain valid Customer and Customer Account Information for each Trading Day and provide a method for Participants and the SEC to easily obtain historical changes to that information (e.g., name changes, address changes). The CAT Processor will design and implement a robust data validation process for submitted Firm Designated ID, Customer Account Information and Customer Identifying Information. The Plan Processor must be able to link accounts that move from one CAT Reporter to another due to mergers and acquisitions, divestitures, and other events. Under the approach proposed by the Participants, broker-dealers will initially submit full account lists for all active 33 Because reporting to the CAT is on an end-of-day basis, intra-day changes to information could be captured as part of the daily updates to the information. See SEC Rule 613(c)(3). To ensure the completeness and accuracy of Customer information and associations, in addition to daily updates, broker-dealers would be required to submit periodic full refreshes of Customer information to the CAT. The scope of the “full” Customer information refresh would need to be further defined, with the assistance of the Plan Processor, to determine the extent to which inactive or otherwise terminated accounts would need to be reported.

Customer and Customer Account Information. In addition to the submission of order and trade data, broker-dealer CAT Reporters must also submit customer information to the CAT so that the order and trade data can be matched to the specific customer.25 SEC Rule 613(c)(7) sets forth data recording and reporting requirements that must be included in the CAT NMS Plan. Under SEC Rule 613(c)(7)(i)(A), the CAT NMS Plan must require each CAT Reporter to record and report “Customer-ID(s) for each customer” when reporting to the CAT order receipt or origination information.26 When reporting the modification or cancellation of an order, the rule further requires the reporting of “the Customer-ID of the 19 RFP Question 49. 20 RFP Questions 59-60. 21 RFP Question 62. 62.‌ 22 RFP Question 63. 23 SEC Rule 613 and Sections 6.3 and 6.4 of the CAT NMS Plan permit certain other information to be reported by 8:00 a.m. Eastern Time on the Trading Day following the day the CAT Reporter receives the information. See SEC Rule 613(c)(4), (c)(7)(vi)-(viii). 24 SIFMA’s recommendations to the Participants regarding the CAT indicates support for the ability of Data Submitters to submit data in batch or near-real-time reporting. See SIFMA Recommendations, at 55. 55.‌ 25 As noted above, the term “customer” means “(i) [t]he account holder(s) of the account at a broker-dealer originating an order, and (ii) [a]ny person from whom the broker-dealer is authorized to accept trading instructions for such account, if different than the account holder(s).” SEC Rule 613(j)(3). 26 SEC Rule 613(c)(7)(i)(A). Person giving the modification or cancellation instruction.”27 In addition, SEC Rule 613(c)(8) mandates that all CAT Reporters “use the same Customer-ID . . . for each customer and broker-dealer.”28 For purposes of SEC Rule 613, “Customer-ID” means, “with respect to a customer, a code that uniquely identifies such customer for purposes of providing data to the central repository.”29 Also, SEC Rule 613(c)(7)(viii) requires that, for original receipt or origination of an order, CAT Reporters report “customer account information,” which is defined as including “account number, account type, customer type, date account opened, and large trader identifier (if applicable).”30 After considering the requirements of SEC Rule 613 with respect to recording and reporting Customer-IDs, Customer Account Information, and information of sufficient detail to identify the Customer as well as industry input and the Commission’s reasons for adopting these requirements, the Participants requested that Industry Members and other industry participants provide ideas on implementing the Customer-ID requirement. After careful consideration, including numerous discussions with the DAG, the Participants concluded that the CAT NMS Plan should use a reporting model that requires broker-dealers to provide detailed account and Customer information to the Central Repository, including the specific identities of all Customers associated with each account, and have the Central Repository correlate the Customer information across broker-dealers, assign a unique customer identifier to each Customer (i.e., the Customer-ID), and use that unique customer identifier consistently across all CAT Data (hereinafter, the “Customer Information Approach”). Under the Customer Information Approach, the CAT NMS Plan would require each broker-dealer to assign a unique Firm Designated ID to each customer, as that term is defined in SEC Rule 613. For the Firm Designated ID, broker-dealers would be permitted to use an account number or any other identifier defined by the firm, provided each identifier is unique across the firm for each business date (i.e., a single firm may not have multiple separate customers with the same identifier on any given date). Under the Customer Information Approach, broker-dealers must submit an initial set of customer information to the Central Repository, including, as applicable, the Firm Designated ID for the customer, name, address, date of birth, Individual Tax ID (“ITIN”)/social security number (“SSN”), individual’s role in the account (e.g., primary holder, joint holder, guardian, trustee, person with the power of attorney) and Legal Entity Identifier (“LEI”),31 and/or Large Trader ID (“LTID”), if applicable.32 Under the Customer Information Approach, broker-dealers would be required to submit to the Central Repository daily updates for 27 SEC Rule 613(c)(7)(iv)(F). 28 SEC Rule 613(c)(8). 29 SEC Rule 613(j)(5). 613(j)(5).‌ 30 SEC Rule 613(j)(4). 31 Where a validated LEI is available for a Customer or entity, it may obviate the need to report other identifier information (e.g., Customer name, address). address).‌ 32 The Participants anticipate that Customer information that is initially reported to the CAT could be limited to only customer accounts that have, or are expected to have, CAT-reportable activity. For example, accounts that are considered open, but have not traded Eligible Securities in a given timeframe may not need to be pre-established in the CAT, but rather could be reported as part of daily updates after they have CAT-reportable activity. reactivated accounts, newly established or revised Firm Designated IDs, or associated reportable Customer information.33 Within the Central Repository, each Customer would be uniquely identified by identifiers or a combination of identifiers such as TIN/SSN, date of birth, and, as applicable, LEI and LTID. The Plan Processor would be required to use these unique identifiers to map orders to specific customers across all broker-dealers. Broker-dealers would therefore be required to report only Firm Designated ID information on each new order submitted to the Central Repository rather than the “Customer-ID” as set forth in SEC Rule 613(c)(7), and the Plan Processor would associate specific customers and their Customer-IDs with individual order events based on the reported Firm Designated ID. The Customer-ID approach is strongly supported by the industry as it believes that to do otherwise would interfere with existing business practices and risk leaking proprietary order and customer information into the market.34 To adopt such an approach, however, requires certain exemptions from the requirements of SEC Rule 613. Therefore, the Participants included the Customer Information Approach in the Exemptive Request Letters so that this approach could be included in the CAT NMS Plan. In addition to the approach described above, the CAT NMS Plan details a number of requirements which the Plan Processor must meet regarding Customer and Customer Account Information. The Plan Processor must maintain information of sufficient detail to uniquely and consistently identify each Customer across all CAT Reporters, and associated accounts from each CAT Reporter. The Plan Processor must document and publish, with the approval of the Operating Committee, the minimum list of attributes to be captured to maintain this association. The CAT Processor must maintain valid Customer and Customer Account Information for each Trading Day and provide a method for Participants and the SEC to easily obtain historical changes to that information (e.g., name changes, address changes). The CAT Processor will design and implement a robust data validation process for submitted Firm Designated ID, Customer Account Information and Customer Identifying Information. The Plan Processor must be able to link accounts that move from one CAT Reporter to another due to mergers and acquisitions, divestitures, and other events. Under the approach proposed by the Participants, broker-dealers will initially submit full account lists for all active 33 Because reporting to the CAT is on an end-of-day basis, intra-day changes to information could be captured as part of the daily updates to the information. See SEC Rule 613(c)(3). To ensure the completeness and accuracy of Customer information and associations, in addition to daily updates, broker-dealers would be required to submit periodic full refreshes of Customer information to the CAT. The scope of the “full” Customer information refresh would need to be further defined, with the assistance of the Plan Processor, to determine the extent to which inactive or otherwise terminated accounts would need to be reported.