The Amended Rules are Intended to be “More Technology Neutral” and Specifically Address Cloud Storage 

On October 12, 2022, the SEC adopted amendments to the electronic recordkeeping requirements under SEC Rule 17a-4, applicable to broker-dealers, as well as SEC Rule 18a-6, applicable to security-based swap dealers and major security-based swap participants that are not registered as broker-dealers.

The amendments modify requirements regarding the maintenance and preservation of electronic records, the use of third-party recordkeeping services, and the prompt production of records. Most notably, the amendments provide for an audit-trail alternative to the current requirement for broker-dealers to maintain and preserve electronic records exclusively in a non-rewriteable, non-erasable format (i.e., “write once/read many” or “WORM” format). According to the SEC, the amendments are designed to modernize the SEC’s recordkeeping requirements given technological changes over the last two decades and to make the rules more technology neutral.

The amendments to SEC Rules 17a-4 and 18a-6 become effective 60 days after publication in the Federal Register, which has not yet occurred as of the date of this Legal Update. The compliance date for the amendments is, with respect to SEC Rule 17a-4, six (6) months after publication in the Federal Register, and, with respect to SEC Rule 18a-6, twelve (12) months after publication in the Federal Register. Importantly, the amendments require updates to (and re-filing of) certain written undertakings previously filed under the rules and potential amendments to existing service provider agreements, as further described in this Legal Update.

In our related Legal Update, Steffen Hemmerich, Anna Pinedo, Nicolas Rodriguez and Stephen Vogt provide an overview of the key aspects of the amendments.