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Proposed Updates to Electronic Recordkeeping Requirements for Broker Dealers

By Robert R. Boeche, Partner of Shustak Reynolds & Partners, P.C. posted on Monday, December 27, 2021.

Robert R. Boeche II

Robert R. Boeche II

Partner

Location: San Diego, California
Phone: (619) 696-9500 (Ext. 122)
Direct: (619) 546-5502
Fax: (619) 615-5290
E-mail: [email protected]

On November 18, 2021, the U.S. Securities and Exchange Commission proposed updates to the Securities Exchange Act of 1934 rules for (i) electronic recordkeeping and (ii) prompt production of records. These updates apply to broker-dealers, security-based swap dealers, and major security-based swap participants. SEC Chair Gary Gensler stated, “this proposal updates an electronic recordkeeping rule adopted in 1997. A lot has changed with respect to database management, among other technologies, in the last 24 years.”[1]

The proposed rules modify the recordkeeping requirements imposed by the Exchange Act to make them more technology neutral. Previously, electronic records were to be stored exclusively in a tamper-proof format known as “write once, read many.” The records in that format were intended to be non-rewritable and non-erasable in order to preserve the original document.[2]

The new audit-trail alternative permits a wider variety of database management approaches. Under the audit-trail alternative, electronic records may be stored in any manner that permits the recreation of an original record, irrespective of whether it had been altered, over-written, or erased. The proposal is expected to open the door for the use of a variety of modern practices for protecting the authenticity and reliability of original records. Nevertheless, a system that preserves the records exclusively in the legacy non-rewritable, non-erasable format will still be allowed under the new rule.[3]

Whichever database technologies you choose to deploy should also be capable of producing electronic records in a “reasonably usable electronic format.” The records produced to regulators must also allow them to search and sort the information contained in the records.[4]

If you have questions about how to comply with the recordkeeping requirements for broker-dealers, security-based swap dealers, or major security-based swap participants, we are here to help.

Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes.
We represent many broker-dealers, registered representatives, investment advisors, investors, and businesses.
Attorney Robert R. Boeche can be reached in the firm’s San Diego office at (619) 696-9500.



[1] SEC Proposes Updates to Electronic Recordkeeping Requirements, Release No. 2021-240, https://www.sec.gov/news/press-release/2021-240 (November 18, 2021).

[2] Id.

[3] Fact Sheet: Proposed Amendments to Electronic Recordkeeping Requirements, https://www.sec.gov/rules/proposed/2021/34-93614-fact-sheet.pdf

[4] Id.

 

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