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Federal Register / Vol. 86, No. 228 / Wednesday, December 1, 2021 / Proposed Rules
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proposing to simplify the introductory text of both paragraphs.68
Paragraph f3i of Rule 17a4
requires a broker-dealer to at all times have available, for examination by Commission or SRO staff, facilities for the immediate, easily readable projection or production of micrographic media or electronic storage media images and for the production of easily readable images.
Similarly, paragraph e3i of Rule 18a6 requires an SBS Entity to at all times have available for examination by Commission staff facilities for the immediate, easily readable projection or production of records or images maintained on an electronic storage system and for the production of easily readable copies of those records or images.
The Commission is proposing amendments to paragraph f3i of Rule 17a4 that would delete references to micrographic media and replace terms that are tied to micrographic media.69 In addition, the proposed amendments to paragraphs f3i of Rule 17a4 and e3i of Rule 18a6
are intended to replace terms that are tied to optical disk technology.70 The Commissions objective is to set forth new requirements that would require broker-dealers and SBS Entities to have facilities available to produce records to the staffs of the Commission, SROs, and state securities regulators, as applicable, and to read records stored on an electronic recordkeeping system.71
68 See introductory text of paragraph f3 of Rule 17a4 and paragraph e3 of Rule 18a6, as proposed to be amended providing, respectively, that a broker-dealer or SBS Entity using an electronic recordkeeping system must:. In addition, the introductory text of paragraph f3 of Rule 17a4, as proposed to be amended, would not reference micrographic media, instead, the existing requirements for using micrographic media would be set forth in new paragraph f4 of Rule 17a4.
69 While paragraph f3i of Rule 17a4, as proposed to be amended, would no longer reference micrographic media, a broker-dealer would continue to be able to use micrographic media to preserve records under the requirements set forth in new paragraph f4 of Rule 17a4.
70 In particular, the amendments to Rule 17a4
would replace the phrase electronic storage media images and the term images with the term record and the amendments Rules 17a4 and 18a6 would remove the term projection. The amendments to Rule 18a6 would remove the term images.
71 See paragraph f3i of Rule 17a4, as proposed to be amended providing that a brokerdealer must at all times have available, for examination by the staffs of the Commission, the self-regulatory organizations of which the member, broker, or dealer is a member, or any State securities regulator having jurisdiction over the member, broker or dealer facilities for immediate production of records preserved by means of the electronic recordkeeping system and for producing copies of those records and paragraph e3i of
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Paragraph f3ii of Rule 17a4
requires a broker-dealer to be ready at all times to provide, and immediately provide, any facsimile enlargement that the staff of the Commission, an SRO, or state securities regulator may request.
Similarly, paragraph e3ii of Rule 18a6 requires that an SBS Entity be ready at all times to immediately provide in a readable format any record or index stored on the electronic storage system that the staff of the Commission requests.
The Commission is proposing amendments to both of these paragraphs to require the broker-dealer and the SBS
Entity to be ready at all times to provide records stored on an electronic recordkeeping system. In particular, the current text of both paragraphs would be replaced with new text requiring the broker-dealer or SBS Entity to be ready at all times to provide immediately any record or information needed to locate records stored by means of the electronic recordkeeping system that the staffs of the Commission, SROs, and state securities regulators, as applicable, may request.72
Paragraph f3iii of Rule 17a4
requires a broker-dealer to store separately from the original, on any medium acceptable under Rule 17a4, a duplicate copy of a record for the requisite time period. Similarly, paragraph e3iii of Rule 18a6
requires that an SBS Entity store separately from the original a duplicate copy of a record stored on the electronic storage system for the requisite time period. These current provisions require broker-dealers and SBS Entities to maintain a second copy of each record.
The Commission is proposing amendments to both of these paragraphs to require the broker-dealer and the SBS
Entity to have a backup set of records when records are preserved on an electronic recordkeeping system.73
Rule 18a6, as proposed to be amended providing that an SBS Entity must at all times have available, for examination by the staffs of the Commission or any State regulator having jurisdiction over the security-based swap dealer or major security-based swap participant, facilities for immediate production of records preserved by means of the electronic recordkeeping system and for producing copies of those records.
72 See paragraph f3ii of Rule 17a4 and paragraph e3ii of Rule 18a6, as proposed to be amended.
73 See paragraph f3iii of Rule 17a4, as proposed to be amended providing that a brokerdealer must maintain a backup electronic recordkeeping system that meets the other requirements of this paragraph f and that retains the records required to be maintained and preserved pursuant to 240.17a3 and 240.17a4
in accordance with this section and paragraph e3iii of Rule 18a6, as proposed to be amended providing that an SBS Entity must maintain a backup electronic recordkeeping system that meets
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Under the proposal, the broker-dealer or SBS Entity would need to have a second electronic recordkeeping system that preserves a second set of records that can be accessed and examined if the primary electronic recordkeeping system storing the primary set of records is disrupted, malfunctions, or otherwise becomes inaccessible. The second electronic recordkeeping system would serve as a redundant source from which to retrieve records if records cannot be retrieved from the primary recordkeeping system. In addition to facilitating examinations, the backup electronic recordkeeping system would promote the business continuity of the broker-dealer or SBS Entity in the event the primary electronic recordkeeping system is disrupted. This would benefit the firm and protect investors and other securities market participants. The second electronic recordkeeping system would need to meet the requirements of Rules 17a4f and 18a6e, except that it would not need a backup recordkeeping system.74 The records stored on the backup electronic recordkeeping system would need to be preserved in accordance with record preservation requirements of Rules 17a 4 or 18a6, as applicable. Among other requirements, this would mean that the second set of records would need to be preserved for their required retention periods.
Paragraph f3iv of Rule 17a4
requires a broker-dealer to organize and index accurately all information maintained on both original and any duplicate storage media. Paragraph f3ivA requires a broker-dealer to have the indexes available at all times for examination by the staffs of the Commission or an SRO. Paragraph f3ivB requires that each index be duplicated and the duplicate copies be stored separately from the original copy of the index. Finally, paragraph f3ivC requires that the original and duplicate indexes be preserved for the time required for the indexed record. Similarly, paragraph e3iv of Rule 18a6 requires an SBS Entity to organize and index accurately all information maintained on both original and any duplicate storage system.
Paragraph e3ivA requires an SBS
Entity to have the indexes available at the other requirements of this paragraph e and that retains the records required to be maintained and preserved pursuant to 240.18a5 and 240.18a6
in accordance with this section.
74 Accordingly, to address this proposed amendment, the text of paragraph f3iii of Rule 17a4, as proposed to be amended, and paragraph e3iii of Rule 18a6, as proposed to be amended, refer to the other requirements of Rules 17a4f and 18a6e, respectively.

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