Compliance responsibilities grow with every passing year. New regulatory mandates, examination priorities, trends in regulatory enforcements, changes in business, personnel changes, adding new business lines. These are only a few of the many considerations of which compliance professionals must be aware in order to run an effective compliance program amidst the ever-evolving landscape. Read More…
Is your small broker-dealer drowning in boxes and boxes of paper? Do you cringe every time you think of storing yet another 50+ page document? Are you interested in exploring the benefits of cloud-based storage? If you answered “yes” to any of these questions, you must first consider your firm’s regulatory requirements for electronic storage media.
As you may remember from our earlier post on the subject, under SEA Rules 17a-3 and 17a-4, a broker-dealer is required to make and keep books and records relating to its business and may maintain and preserve records by means of “electronic storage media.” The Securities and Exchange Commission (SEC) recently released guidance in response to a letter received from FINRA regarding contractual arrangements between broker-dealers and third-party recordkeeping service providers – more specifically, contractual arrangements that include provisions permitting the third-party recordkeeping service providers to delete or discard the broker-dealer’s records, typically due to non-payment by the broker-dealer of fees due under the contract. FINRA recapped the guidance received from the SEC in its Regulatory Notice 18-31.
Under certain conditions, a broker-dealer may maintain and preserve records by means of “electronic storage media.” SEC Rule 17a-4 defines that term as “any digital storage medium or system” that meets the conditions set forth in the rule. Many common forms of digital storage media (for example, flash drives, backup drives, portable hard drives) are not “electronic storage media” for purposes of Rule 17a-4 because they do not meet the conditions set forth in the rule. For this reason, broker-dealers should not use the term “electronic storage media” loosely to mean any digital storage medium or system. Instead, the term should be used only to describe digital storage media and systems that satisfy the conditions set forth in Rule 17a-4. To satisfy these conditions, electronic storage media must: Read More…