Don’t get fined: SEC Rule 17a-4 updates you should know about

The First Changes in 25 Years, and Why?

SEC Rule 17a-4 and 18a-6 under the Securities Exchange Act of 1934, which define a set of electronic recordkeeping and prompt production of records requirements for registered broker-dealers, security-based swap dealers (“SBSDs”) and major security-based swap participants (“MSBSPs”), have their first updates in 25 years. The amendments are effective on January 3, 2023.

“The amendments are designed to modernize recordkeeping requirements given technological changes over the last two decades and to make the rule adaptable to new technologies in electronic recordkeeping”, quoted from the SEC recent press release. The most noticeable amendment is adding an audit trail as an alternative stated in Rule 17a-4(f)(2)(ii)(A) to the long-ago adopted requirement to preserve records in write-once, read-many (WORM) format. It eliminates the need for firms to deploy a separate electronic recordkeeping system used for compliance purposes only, which also lowers the compliance cost.


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