Rule 17a-4Rule 17a-4

SEC Rule 17a-4 is the succinctly titled "Applicability of CFTC and SEC Customer Protection, Recordkeeping, Reporting, and Bankruptcy Rules and the Securities Investor Protection Act of 1970 to Accounts Holding Security Futures Products."

It concerns itself with the types of records to be created and kept by brokers and dealers for security transactions. The SEC, Security and Exchange Commission published Rule 17a-4 in 2003 to define strict requirements for storage of these electronic records for all its members.

We have certain well publicized corporate frauds and failures to thank for these rules as the SEC drafted and passed them as a result of certain high profile cases in which incomplete or missing records hampered the prosecution of those responsible for significant corporate crimes.

Rule 17a-4 works with Rule 17a-3 of the original 1934 Act to require broker-dealers to create and preserve a comprehensive record of each transaction in an easily accessible format. This also includes records of securities business in general as well as transaction specific records. These records are to be used by the SEC to monitor compliance with the various laws and anti-fraud provisions and financial responsibility standards.

To comply with Rule 17a-4, a broker must maintain records for a specific time period, which varies according to the record. They must also store them in an easily retrievable and accessible manner. They must not be able to be lost, damaged, overwritten, erased or otherwise altered while being stored. There must also be an audit trail that can be plainly followed for each record and demonstrable verification that the records were not altered at any time.

The records must also be duplicated. Indexed, time and date stamped and kept securely for the entire period of retention. They must also be readily available if or when the SEC requests them.

As complicated and burdensome as this may be, this rule is designed to ensure those large scale crimes, and corporate failures never happen again, or if they do that the culprits can be quickly found before they escape justice. The thought is that detailed records of every transaction acts as a preventative measure as well as the means to prosecute should it become necessary.

The good news is that this kind of regulation is already in place under other legislation, so most businesses will already be compliant with most, if not all this rule. The other SEC, NYSE, SOX and HIPAA rules also dictate the need for organizations to retain, document, index and securely store electronic and written records of their business affairs for varying lengths of time.

Chances are that any business, broker or otherwise who already complies with the other regulations should be mostly, if not completely covered for Rule 17a-4. If you're not a lawyer, bookkeeper, or politician then you've probably never seen or herd of SEC Rule 17a-4. To the common person this jumble of letters and numbers means nothing but to people in certain jobs they are all too familiar with it. To find out more visit SEC.GOV.
by Barry Goodknight
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Written by PC Pro Schools for Smarsh. Article sourced mostly from here: 17a-4
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