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 (e.g., NASD, OTC)

Record Retention

SEC rules 17a-3 and 17a-4 require broker dealers to "make and keep current" specific books and records relating to that business and retain those records - and other pertinent documents for up to 6 years.

Rule 17a-3- Records to be Made

SEC rule 17a-3 identifies specific books and records required to be maintained by each member of a national securities exchange or market that transacts business in securities directly or indirectly with customers who are not members of a national securities exchange. In English, this means customers who are not other brokerage firms.

Additionally, rule 17a-3 requires that the brokerage firm 'keep current' in its generation of the required books and records. That is, the rule dictates how often the firm must generate and/or update each required document.

Rule 17a-4 - Records to be Preserved

SEC rule 17a-4 dictates how long the brokerage firm must retain both the books and records required by rule 17a-3 and other brokerage related documents identified within rule 17a-4. Rule 17a-4 requires brokerage firms to retain the required records for periods of either 3 or 6 years. The specific retention period depends on the actual record or document.

Regardless of the retention period - 3 or 6 years - 17a-4 specifies that the records and documents maintained must be "easily accessible" for the first two years of the retention period.

Click Here for a listing of the brokerage records required to be maintained under SEC rule 17a-3, the frequency that each must be recorded or updated, and the retention period specified under SEC rule 17a-4 for each.

Click Here to view other documents required to be preserved by SEC rule 17a-4 and the required retention periods.

Storage Medium

Rule 17a-3 gives the brokerage firm some flexibility as to the storage medium for the preservation of the records and documents that are required to be maintained and preserved under rules 17a-3 and 17a-4. Four options are available to the brokerage firm:

  • Original Hard Copy
  • Microfilm
  • Microfiche
  • Optical Disc

Original Hard Copy

Retention of the Original Hard Copy simply means that the brokerage firm retains the actual paper document or report.

Microfilm and Microfiche

Microfilm is a film bearing a photographic record - on a reduced scale - of a printed or graphic image.

Microfiche is a sheet of microfilm containing rows of micro-images of pages of printed matter.

Brokerage firms choosing to substitute microfilm or microfiche for the actual hard copy records and documents required under 17a-3 and 17a-4 must comply with the following additional requirements:

  • The member must maintain readily accessible facilities for the viewing and printing of microfilm and microfiche for examination by SEC or other appointed examiners.
  • The microfilm/microfiche must be indexed in a manner that permits immediate location of any record.
  • The microfilm/microfiche must be readily available to SEC examiners on other representatives upon request
  • A duplicate copy of such microfilm/microfiche must be maintained and stored separately from the original for the required retention period.

Optical Storage Technology

Optical Storage Technology, or C.O.L.D (Computer Output to Laser Disc) Technology, which allows for digital recording of required records and documents is permitted so long as the records are maintained in a hardware controlled non re-writeable format.

In addition to meeting the access, indexing and duplicate storage requirements set forth for microfilm and microfiche - firms employing optical technology to satisfy the retention requirements of 17a-3 and 17a-4 must comply with additional criteria including the following:

  • The firm must notify the SEC in writing before employing Optical Storage Technology
  • The Optical record must be a non-alterable permanent record - 'W.O.R.M.' - Write Once Read Many
  • The brokerage firm must have in place a system to audit the integrity of the optical system and stored optical disks.
  • The brokerage firm must designate at least one third party with the ability to download information from the firm's Optical System at the request of the SEC or other designated examiners, and must disclose the identity of that designated third party to the SEC prior to utilizing the Optical System for the retention of records and documents

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