SEC Rules 17a-3 and 17a-4 Compliance

Answering the whos, whats, and hows of regulatory compliance with SEC Rules 17a-3 and 17a-4

Who has to comply with these rules?

In short, these regulations apply to anyone who trades securities as a broker, dealer, or as any part of the stock market trading process.

What are “securities?”

A security is any investment that can be transferred or sold: stocks, bonds, notes, royalties, etc.

What do SEC Rules 17a-3 and 17a-4 require of businesses?

These amendments require brokers and dealers to keep records that pertain to “purchase and sale documents, customer records, associated person records, customer complaints” and a few other related files. Moreover, each record must be copied and stored in two separate locations.

How must these records be retained?

SEC rule 17a-4 requires that electronically stored records “be non-rewriteable and non-erasable (or write once, read many "WORM"); automatically verify the accuracy of stored information; serialize and time-date the records; and create indexes of the records.”

How long must these records be retained?

Digital records must be kept for at least six years after their creation.

What are the penalties of SEC Rules 17a-3 and 17a-4 non-compliance?

Typically, penalties are either monetary or suspension based, depending on the non-compliant act(s). Both types of penalty scale depending on the severity. Monetary non-compliance fines can be as little as $1,000 to more than $100,000. Individuals found responsible can also be sanctioned with suspensions ranging from a few days to a lifetime ban, or, if non-compliance is deemed to be pervasive across the firm, entire companies can be suspended or banned as well.

If you want to learn more about compliance management software that assists in record retention and SEC Rules 17a-4 and 17a-4 compliance, read our Compliance Manager datasheet and brochure.

For more details, read their documentation as they reserve the final say on regulatory compliance standards.

A graduate from Kalamazoo College, Martin Hansknecht serves as a marketing associate for ZL Tech. He gets his Midwestern charm from growing up in the mitten of Michigan, his East Coast work ethic from his time spent in NY and D.C., and his European fashion from years living in England, Germany, and Hungary. Now he is looking forward to absorbing that innovative West Coast mindset!