SEC Proposes Amendments To Electronic Recordkeeping Requirements

The SEC proposed amendments to its broker-dealer and security-based swap dealer electronic recordkeeping requirements, most significantly to do away with the requirement that records be kept in a non-rewriteable, non-erasable format (better known as "write one, read many" or "WORM"). The SEC stated that it is proposing these amendments because the current version of its broker-dealer electronic recordkeeping rule, SEA Rule 17a-4 ("Records to be preserved by certain exchange members, brokers and dealers"), adopted in 1997, does not accommodate contemporary electronic recordkeeping systems.

The proposed amendments are intended to (i) make the rule "technology neutral," such that it is compatible with future electronic recordkeeping innovations, (ii) improve electronic recordkeeping requirements and (iii) facilitate inspections and examinations. In place of the WORM requirement, the SEC would adopt an "audit-trail alternative," which would be defined as a