Understanding SEC and FINRA Electronic Record-Keeping Rules

In today’s digital age, where information is created, exchanged, and stored electronically, regulatory bodies like the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have established guidelines to ensure proper record-keeping practices. 

Financial firms and professionals must comply with these rules to maintain transparency, protect investors, and meet regulatory requirements. An article from TeleMessage,  provides a comprehensive understanding of the SEC and FINRA electronic record-keeping rules, outlining their importance and key considerations.

Today, electronic records such as archived text messages and calls have become the norm across industries, including the financial sector.The SEC and FINRA recognize the importance of electronic record-keeping and have issued specific guidelines to ensure the accuracy, accessibility, and integrity of these records.

SEC Electronic Record-Keeping Rules

The SEC’s rules on electronic record-keeping are primarily outlined in Rule 17a-3 and Rule 17a-4 of the Securities Exchange Act of 1934. These rules require broker-dealers to maintain and preserve certain records in an easily accessible and retrievable electronic format. Some key considerations include:

Record Retention

Broker-dealers must retain records for a specified period, typically ranging from three to six years, depending on the specific record type.

Security and Integrity

Electronic records must be protected from alteration, unauthorized access, and loss. Appropriate measures, such as access controls, encryption, and backup systems, should be implemented to ensure the security and integrity of these records.

FINRA Electronic Record-Keeping Rules

FINRA, as a self-regulatory organization overseeing broker-dealers and their registered representatives, has its own set of electronic record-keeping rules. These rules supplement the SEC requirements and provide further guidance on compliance.

Importance of Compliance

Compliance with SEC and FINRA electronic record-keeping rules is vital for several reasons:

Investor Protection

By maintaining accurate and complete records through instant message capture and other archiving solution, financial firms can provide evidence of their activities and transactions, ensuring investor protection and supporting regulatory investigations, if required.

Regulatory Requirements

Compliance with record-keeping rules helps financial firms fulfill their regulatory obligations, avoiding penalties and reputational damage associated with non-compliance.

Operational Efficiency

Proper electronic record-keeping practices enable firms to efficiently retrieve and review records when needed, streamlining internal processes and facilitating audits.

Financial firms and professionals must understand and adhere to SEC and FINRA electronic record-keeping rules. By implementing robust electronic record-keeping systems and practices, organizations can meet their obligations while harnessing the benefits of a digitized environment.