SEC Rule 17a-4 and Electronic Data

SEC Rule 17a-4 and Electronic Data

September 19, 2017

Rule 17a-4 of the Securities Exchange Act of 1934 requires certain records ("trade blotters, asset and liability ledgers, income ledgers, customer account ledgers, securities records, order tickets, trade confirmations, trial balances, and various employment related document")   to be retained for two years where they are immediately accessible, and up to six years in storage that a company may not have immediate access to.  Duplicate records have to be kept in off-site storage for the same period of time.

 

The SEC issued an interpretation of this rule, Electronic Storage of Broker-Dealer Records , Release No. 34-47806, in 2003 which held that brokers-dealers could store the required records in a 'non-rewritable and non-erasable' format.   The SEC decided that this format includes not only optical discs, but also systems, "integrated hardware and software codes that are intrinsic to the system to prevent the overwriting, erasure or alteration of the records."  However the SEC found that systems which only use passwords or other 'extrinsic security controls', do not actually prevent the deletion of records, and so would not comply with requirements of Rule 17a-4.  

 

Because of the possibility that retained records will be subject to subpoenas, the systems employed to retain them must allow for them to be retained longer than the required period.   It must be possible to overwrite an automatic setting to delete the records after six years.

 

 

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