The SEC recently amended Exchange Act Rule 17a-4 by adopting new recordkeeping requirements for broker-dealers. Most notably, the SEC will no longer require broker-dealers to maintain records in “write once, read many” or “WORM” format. Instead, broker-dealers have the option of utilizing a new “audit trail” alternative for their electronic recordkeeping systems. The changes also affect the use of third-party recordkeeping services and requirements related to timely production of records. The compliance date for broker-dealers is May 3, 2023.
For its part, FINRA recently published a chart summarizing what it deems as the “most significant changes” and other nuances between the legacy and amended rule. We have summarized a handful of those below and added several of our own points. Firms should consider these differences, nuances, and other considerations as they determine how to adapt their processes to the new audit trail alternative (if they choose that path at all). Digital Key Box
Electronic Key Tracking Locker Broker-dealers will be obligated to ensure that arrangements with third party recordkeepers comply with these new requirements. Cloud storage providers will also need to be mindful of the obligations they are undertaking. Importantly, FINRA noted that firms that continue using their existing D3P to comply with Rule 17a-4(f) must confirm that the D3P files new undertakings with FINRA by May 3, 2023, because the language of the legacy undertaking has changed.