FINRA Rule 6898

The Formal Dispute Procedure

An Industry Member disputing its CAT Fees must file a written application with CAT NMS, LLC, and the Company then promptly refers that application to a Subcommittee the Operating Committee has designated under Section 4.12 of the CAT NMS Plan specifically to handle CAT Fee dispute reviews, referred to as the Fee Review Subcommittee. Members of the Fee Review Subcommittee are themselves subject to the CAT NMS Plan's recusal and conflict of interest provisions under Section 4.3(d), a structural safeguard ensuring the body reviewing a firm's fee dispute does not include individuals with a direct, undisclosed conflict affecting the specific dispute under review.

The Fee Review Subcommittee must hold hearings promptly, setting a hearing date and requiring the parties to furnish all materials relevant to the proceeding at least 72 hours before that hearing. Each party has the right to inspect and copy the other party's submitted materials before the hearing occurs, and each party is permitted to make an opening statement, present witnesses and documentary evidence, cross-examine opposing witnesses, and present closing arguments either orally or in writing, as the Subcommittee itself determines. The formal rules of evidence do not apply to these proceedings, reflecting the streamlined, administrative character of the process relative to a full judicial or arbitration proceeding, and the Subcommittee itself retains the right to question all parties and witnesses directly.

The Fee Review Subcommittee must issue its decision in writing, sent to the parties, and that written decision must contain the reasons supporting the Subcommittee's conclusions rather than a bare, unexplained outcome. This decision is not automatically final; it is subject to review by the Operating Committee, either on the Operating Committee's own motion within 20 business days after the Subcommittee's decision issues, or upon the applicant's own written request submitted within 15 business days after that decision issues. Where the Operating Committee does conduct this review, it does so based on the existing record, supplemented by whatever further proceedings the Operating Committee itself orders, and may affirm, reverse, or modify the Fee Review Subcommittee's decision, in whole or in part. The Operating Committee's own decision, once issued in writing and sent to the parties, is final.

The Ninety-Day Resolution Deadline and the Payment Stay

Rule 6898 imposes an overall time constraint on the entire process: a final decision on disputed CAT Fees, whether from the Operating Committee or from the Fee Review Subcommittee where no Operating Committee review occurs, must be provided within 90 days of the date the Industry Member filed its original written application. The Operating Committee retains discretion to extend this 90-day limit, meaning the deadline functions as a strong default expectation rather than an absolute, immovable cutoff.

Perhaps the single most practically significant provision in the entire rule is the payment stay it creates: an Industry Member that files a written application disputing its CAT Fees is not required to pay the disputed portion of those fees until the dispute is actually resolved under these procedures, including any Operating Committee review. This means a firm genuinely disputing a fee calculation, rather than merely delaying payment through a pretextual dispute, is not forced to pay first and seek reimbursement later; it may withhold payment of the specifically disputed amount throughout the entire resolution process, a meaningful protection given that CAT fee disputes can, in principle, involve substantial sums for a firm with significant trading volume.

Finality and the Preserved Right to External Redress

Decisions reached through this process are binding on Industry Members, but Rule 6898 explicitly preserves a firm's separate right to seek redress from the SEC or in any other appropriate forum, notwithstanding the binding nature of the internal CAT dispute resolution outcome itself. This means the Rule 6898 process functions as a mandatory internal step rather than an exclusive, final resolution mechanism precluding all further recourse; a firm dissatisfied with the ultimate outcome retains the ability to pursue the matter further through external channels, even after exhausting the internal Fee Review Subcommittee and Operating Committee review process.

A Structural Model Borrowed From Exchange Adverse Action Procedures

FINRA's own explanation for Rule 6898's design draws a direct comparison to existing exchange "adverse action" procedures, citing provisions such as Chapter X of BATS BZX Exchange and Chapter X of NYSE National as structural models the CAT fee dispute framework followed. This lineage explains why Rule 6898's procedure reads more like a quasi-adjudicative hearing process, complete with witnesses, cross-examination, and a written reasoned decision, than a simple customer service billing dispute mechanism; it was deliberately modeled on the kind of formal administrative review process exchanges have long used for adverse membership or access determinations, adapted here specifically to the CAT fee context.

A Worked Scenario Illustrating the Full Process

Consider a firm that receives a monthly CAT Fee invoice reflecting a substantially higher executed equivalent share count than the firm's own internal records indicate it actually executed as either a CEBB or CEBS during the relevant period, suggesting a possible misattribution of transactions to the firm under the Supplementary Material .01 framework discussed in the Rule 6897 entry. The firm files a written application with CAT NMS, LLC disputing the specific invoiced amount attributable to this apparent misattribution, and, having filed that application, is not required to pay the disputed portion of the invoice while the matter proceeds.

CAT NMS, LLC refers the application to the Fee Review Subcommittee, which sets a hearing date and requires both the firm and, where relevant, CAT LLC itself to furnish supporting materials at least 72 hours in advance. At the hearing, the firm presents its internal trade records and the specific executing-party and contra-party field values from the underlying transaction data supporting its position that certain transactions were incorrectly attributed to it as CEBB or CEBS, and CAT LLC presents its own supporting data reflecting the basis for the original invoice. Following the hearing, the Fee Review Subcommittee issues a written decision, with reasons, either upholding the original fee calculation, adjusting it in the firm's favor, or reaching some other resolution based on the evidentiary record presented.

If the firm disagrees with this decision, it has 15 business days to request Operating Committee review; alternatively, the Operating Committee could elect to review the decision on its own motion within its own 20-business-day window regardless of whether the firm requests it. Assuming the firm timely requests review, the Operating Committee examines the existing record, potentially orders further proceedings, and ultimately issues its own final, written decision affirming, reversing, or modifying the Subcommittee's original determination. The entire process, from the firm's original application through this final Operating Committee decision, must conclude within 90 days absent an Operating Committee extension, and once concluded, the firm either pays the disputed amount as finally determined or, if it disagrees even with this final internal decision, may pursue the matter further with the SEC or another appropriate external forum, since the internal decision, while binding, does not foreclose that separate avenue.

Relevance Across FINRA's Exam Programs

The SIE, Series 63, and Series 65 do not test Rule 6898's dispute procedures, since these exams do not reach into CAT's internal administrative review mechanisms. A Series 7 candidate is unlikely to encounter this rule directly, though understanding that CAT fee disputes follow a structured, quasi-adjudicative process rather than an informal customer service channel reinforces broader awareness of how FINRA and the CAT NMS Plan handle formal disagreements with member firms.

A Series 24 candidate supervising a firm's finance and compliance functions needs to understand the payment stay provision precisely, since a firm considering whether to formally dispute a CAT Fee calculation should factor in that filing a proper written application relieves it of the obligation to pay the disputed amount while the matter proceeds, a meaningful consideration when deciding whether a genuine calculation dispute justifies invoking this formal process rather than simply paying and treating the amount as immaterial. A principal should also understand the layered review structure, Fee Review Subcommittee decision followed by optional Operating Committee review, and the specific, asymmetric timing windows governing when that further review can be triggered, 20 business days for the Operating Committee's own motion versus 15 business days for the applicant's own request. A Series 57 candidate is less directly implicated by this particular rule, though should understand that fee disputes connect back to the same CEBB and CEBS determination logic discussed in the Rule 6897 entry, since an incorrect CEBB or CEBS designation on a given transaction is precisely the kind of underlying error that could give rise to a legitimate fee dispute in the first place.

Practical Guidance for Firms

Firms considering a CAT Fee dispute should build a clear internal process for evaluating whether a specific fee discrepancy justifies invoking the formal Rule 6898 procedure, weighing the administrative burden of preparing a written application and potentially participating in a formal hearing against the actual dollar magnitude of the disputed amount and the strength of the underlying factual basis for the dispute. Given the payment stay this process provides, firms should also recognize that filing a dispute application, where genuinely warranted, offers real cash flow benefit during the pendency of the dispute, a consideration separate from the ultimate merits of the underlying disagreement itself, and one that should factor into a firm's own internal cost-benefit calculation when deciding whether a given fee discrepancy is worth formally disputing.

Firms preparing a Rule 6898 application should build their supporting factual record carefully from the outset, given that the Fee Review Subcommittee's hearing process requires furnishing all relevant materials at least 72 hours before the hearing date, leaving limited time to assemble additional support once the hearing itself has been scheduled. A firm disputing its CEBB or CEBS designation on specific transactions, for example, should be prepared to present the underlying trade report data and executing-party field values supporting its position, since this is precisely the kind of documentary evidence the hearing process contemplates parties presenting and cross-examining, and a firm arriving at the hearing without this specific, granular transaction-level support is poorly positioned relative to one that has assembled a complete evidentiary record well in advance of the 72-hour deadline.

Firms should also track the specific procedural deadlines this rule creates, particularly the 15-business-day window for the applicant itself to request Operating Committee review of an unfavorable Fee Review Subcommittee decision, since missing this window forecloses that avenue of further internal review even though the Operating Committee retains separate authority to review a decision on its own motion within a longer 20-business-day window. A firm dissatisfied with a Fee Review Subcommittee decision should not assume the Operating Committee will necessarily elect to review the matter on its own initiative, and should treat the applicant-initiated request as the more reliable path to securing further review within the process, building this deadline into the firm's own internal case management tracking the moment an unfavorable Subcommittee decision is received.

Finally, firms should understand that exhausting the Rule 6898 process does not foreclose further recourse, and a firm that receives an unfavorable final decision from the Operating Committee retains the ability to pursue the matter with the SEC or through another appropriate external forum. This preserved right should inform how a firm approaches the internal dispute process from the outset, since even an unfavorable outcome at the CAT NMS Plan level does not necessarily represent the end of a firm's available options for a genuinely significant, well-founded fee dispute.