SEC Final Rule on Broker-Dealer Electronic Recordkeeping Requirements Set for Publication in Federal Register

The Securities and Exchange Commission (SEC) is adopting amendments to the recordkeeping rules applicable to broker-dealers, security-based swap dealers (SBSDs), and major security-based swap participants (MSBSPs). The amendments modify requirements regarding the maintenance and preservation of electronic records, the use of third-party recordkeeping services to hold records, and the prompt production of records. The SEC is also designating broker-dealer examining authorities as SEC designees for purposes of certain provisions of the broker-dealer record maintenance and preservation rule.

The SEC’s broker-dealer electronic recordkeeping rule currently requires firms to preserve electronic records exclusively in a nonrewriteable, nonerasable format, known as the write once, read many format. The amendments add an audit-trail alternative under which electronic records can be preserved in a manner that permits the recreation of an original record if it is altered, over-written, or erased. According to the SEC, the audit-trail alternative is designed to provide broker-dealers with greater flexibility in configuring their electronic recordkeeping systems so they more closely align with current electronic recordkeeping practices while also protecting the authenticity and reliability of original records. The amendments apply the same requirements to nonbank SBSDs and MSBSPs.

The amendments also require broker-dealers and all types of SBSDs and MSBSPs to produce electronic records to securities regulators in a reasonably usable electronic format.

With publication in the federal register set for tomorrow, the final rule is effective January 3, 2023, and compliance dates for the new requirements will be May 3, 2023, for broker-dealers and November 3, 2023, for SBSDs or MSBSPs.