Citadel Securities wins Eleventh Circuit decision invalidating SEC order creating funding mechanism for CAT
Client(s) Citadel Securities LLC
Jones Day successfully represented Citadel Securities LLC in persuading the Eleventh Circuit to invalidate an important order issued by the Securities and Exchange Commission ("SEC"). The SEC's order created a funding mechanism for an unprecedented government surveillance system that allows the Commission to directly track the confidential information and activities of every investor in the U.S. securities markets. Known as the Consolidated Audit Trail ("CAT"), this first-of-its-kind database required more than $1 billion to develop and will require $200 million or more annually to operate.
Citadel Securities challenged the order funding the CAT alongside co-petitioner the American Securities Association ("ASA"). The Eleventh Circuit agreed with the challengers and declared the SEC's order unlawful under the Administrative Procedure Act. The court held that the SEC had failed to explain its departure from past statements about funding the CAT, and that it failed adequately to consider the economic effects of the CAT's costs, which have skyrocketed in recent years. The decision sends the SEC back to the drawing board in the event it wants to create a funding mechanism for the CAT that is equitable for the affected parties and economically reasonable.
American Securities Association v. SEC, No. 23-13396 (11th Cir.)
