The SEC has published proposed amendments designed to revise and enhance requirements for the means by which broker-dealers, security-based swap dealers (SBSDs), and major security-based swap participants (MSBSPs) maintain electronic records and produce prompt records. These changes are intended to modernize current record-keeping requirements to facilitate the production of more timely and accurate information.
The proposed updates will amend the electronic record preservation and prompt production of records requirements for the following rules:
Exchange Act Rules 17a-4(f) and (j) which set forth the electronic recordkeeping and prompt production of records requirements for broker-dealers, including broker-dealers also registered as SBSDs or MSBSPs, adopted in 1997
Rules 18a-6(e) and (g) which set forth the electronic recordkeeping and prompt production of records requirements applicable to SBSDs and MSBSPs that are not also registered as broker-dealers, adopted in 2019
The requirements in the above rules apply to records that registrants must maintain for specified periods of time, for example, three or six years.
The proposed amendments will modernize the current rules to keep pace with innovations in electronic recordkeeping by:
Adding an audit-trail alternative to the current requirement that broker-dealers preserve electronic records exclusively in a non-rewriteable, non-erasable format (or “write once, read many”)
Requiring that broker-dealers, SBSDs, and MSBSPs produce electronic records in a reasonably usable electronic format to allow securities regulators to search and sort information on the records
Addressing cyber security concerns by replacing a requirement in the broker-dealer recordkeeping rule that a third party with the ability to access the firm’s electronic records must undertake to provide the records to securities regulators if the firm refuses to do so with a requirement that a senior officer undertake this responsibility
Requiring that, to meet the audit-trail alternative, a broker-dealer’s electronic recordkeeping system must maintain electronic records in a manner that allows the recreation of an original record if it is altered, over-written, or erased
Adding a similar senior officer requirement to the SBSD and MSBSP rule
Requiring that non-bank SBSDs and MSBSPs preserve electronic records in a manner that either meets the audit-trail requirement or preserves the records exclusively in a non-rewriteable, non-erasable format
Remove or replace text to make those rules more technology neutral and to enhance readability
For more information, contact Michael A. Macchiaroli, Associate Director, at (202) 551-5525; Thomas K. McGowan, Associate Director, at (202) 551-5521; Randall W. Roy, Deputy Associate Director, at (202) 551-5522; Raymond A. Lombardo, Assistant Director, at (202) 551-5755; Joseph I. Levinson, Senior Special Counsel, at (202) 551-5598; or Timothy C. Fox, Branch Chief, at (202) 551-5687, Division of Trading and Markets, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-7010.