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SEC adopts rule amendments to modernize preservation of electronic records

On Behalf of | Oct 25, 2022 | Regulatory Investigations

The Securities and Exchange Commission is taking steps to modernize the process of electronic recordkeeping by broker-dealers and security-based swap dealers, according to a report by ThinkAdvisor.

The SEC voted last week to adopt amendments to its rules pertaining to electronic recordkeeping, prompt production of records, and third-party recordkeeping requirements. Under current regulations, firms are required to preserve their electronic records exclusively in a non-rewriteable, non-erasable format, known as the write once, read many format. The newly adopted amendments will add what is called an audit-trail alternative. This would preserve the records in a way that allows the original record to be recreated if it has been altered, over-written or erased.

The SEC said it adopted the updates in light of the technological changes over the last two decades and the new technologies utilized in electronic recordkeeping.

“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,” said 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. 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.”

According to the SEC, broker-dealers will now have more flexibility to align their present electronic recordkeeping systems with current practices while also protecting the authenticity of their original records.

The SEC said the amendments are also designed to facilitate examinations of broker-dealers, security-based swap dealers and major security-based swap participants. They will now be required to produce electronic records to securities regulators in “a reasonably usable electronic format”, the commission said.

The adopting release will be published on and in the Federal Register. The final amendments will become effective 60 days after they are published in the Federal Register.

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