SEC Votes to Modernize How BDs Can Preserve Electronic Records

The adopting release will be published on SEC.gov and in the Federal Register, and the final amendments will become effective 60 days after publication in the Federal Register, the SEC said.

The compliance dates for the new requirements will be six months after publication in the Federal Register in the case of BDs and 12 months after publication in the Federal Register in the case of SBSDs and MSBSPs.

“I am pleased to support these rule amendments because they will bring the Commission’s electronic recordkeeping requirements for intermediaries such as broker-dealers and security-based swap dealers in line with technological innovation,” according to SEC Chair Gary Gensler.

“Since the 1930s, recordkeeping obligations have been vital to maintain market integrity and the SEC’s work as the cop on the beat,” he said in a statement. “Today’s rule amendments will facilitate the SEC’s ability to examine and inspect records consistent with modern technology. This will enhance the Commission’s ability to preserve market integrity and protect investors.”

Melissa MacGregor, SIFMA managing director and associate general counsel, applauded the SEC’s move.

The amendments will “bring electronic recordkeeping requirements into the modern era and …  better allow the use of current technology standards while allowing for the inevitable future,” she said in a statement. “Updating these antiquated technology-specific rules will allow securities firms’ quicker adoption of communication technologies and other applications which will allow firms to provide a better investor experience.”

The SEC’s new rule “provides greater flexibility for broker-dealer storage of electronic records and modernizes the electronic recordkeeping requirements for broker-dealers by permitting an ‘audit-trail’ alternative to the more prescriptive write-once-ready-many or WORM recordkeeping requirements,” according to Ben Marzouk, partner at Eversheds Sutherland.

“With this rule, the SEC shifts to a more business-friendly approach, which would better align with the SEC’s recordkeeping rules with current technologies and broker-dealer industry practices,” Marzouk added.

(Photo: Diego M. Radzinschi/ALM)