Quiero saber acerca de...

68324

Federal Register / Vol. 86, No. 228 / Wednesday, December 1, 2021 / Proposed Rules
concerning the collections of information between 30 and 60 days after publication, a comment to OMB is best assured of having its full effect if OMB receives it within 30 days of publication.

lotter on DSK11XQN23PROD with PROPOSALS2

VI. Initial Regulatory Flexibility Act Analysis A. Reasons for, and Objectives of, the Proposed Action The proposed amendments to Rules 17a4 and 18a6 are designed to modernize the electronic recordkeeping requirements for broker-dealers and SBS
Entities, and to align the requirements in those rules more closely to the current electronic recordkeeping practices of broker-dealers and SBS
Entities. As discussed in greater detail above, the amendments to Rule 17a4
would provide an audit-trail alternative to the current requirement that brokerdealer electronic records be preserved exclusively in a non-rewriteable, nonerasable format. The audit-trail alternative would require that the electronic records be preserved in a manner that permits the recreation of an original record if it is altered, overwritten, or erased. Rule 18a6, which applies to SBS Entities, currently does not have a requirement to preserve electronic records: 1 In a manner that permits the recreation of an original record if it is altered, over-written or erased; or 2 exclusively in a nonrewriteable, non-erasable format. The amendments to Rule 18a6 would require an SBS Entity without a prudential regulator that preserves records electronically to meet one of these two requirements. The Commission believes that the amendments will save many brokerdealers and SBS Entities from the burden of maintaining two sets of parallel records: one for business purposes, preserved in a manner that would fulfill the audit-trail alternative requirements that the Commission is proposing, and another set of records that is preserved in a non-rewritable, non-erasable method in order to comply with the current requirements of 17a 4f.
The proposed amendments also would eliminate the third-party access and undertakings requirements and replace them with a requirement that a senior officer of the broker-dealer provide the access and undertakings.
The Commission preliminarily believes that the existing third-party access and undertakings requirements are outdated in light of the changed technological environment and that providing a third party access to electronic recordkeeping
VerDate Sep<11>2014

17:28 Nov 30, 2021

Jkt 256001

systems and customer information needlessly exposes firms to data leakage and cybersecurity threats. The Commission preliminarily believes replacing the third-party access and undertakings requirements with a requirement that a senior officer provide access and the undertakings would address cybersecurity and trade-secret concerns about requiring a third party to fulfill this responsibility.
In addition, the amendments would add a requirement to Rule 17a4j and 18a6g that a broker-dealer or SBS
Entity, respectively, furnish a record and its audit trail if applicable preserved on an electronic recordkeeping system pursuant Rules 17a4f and 18a6g, respectively, in a reasonably usable electronic format, if requested by a representative of the Commission. The Commission believes that the production of records in a reasonably usable electronic format would facilitate examinations and other regulatory reviews by making them more efficient.
The amendments to Rule 17a4 also would eliminate a requirement that the broker-dealer notify its DEA before employing an electronic recordkeeping system. The Commission preliminarily believes this requirement is no longer necessary because the rule was adopted at a time when the use of electronic recordkeeping systems by broker-dealers to meet the record preservation requirements of Rule 17a4 was a relatively new phenomenon, and the staff of DEAs, including FINRA, now have substantial experience and familiarity with the topic.
Finally, the amendments to both rules would remove or replace text to make them more technology neutral and to improve readability.
B. Legal Basis Pursuant to Exchange Act Section 17, 15 U.S.C. 78q the Commission is proposing to revise 240.17a4f and j and 240.18a6e and g of title 17 of the Code of Federal Regulations.
C. Small Entities Subject to the Proposed Rules As discussed above, the Commission estimates that approximately 3,551
broker-dealers and 25 SBSDs that are not broker-dealers would be subject to the new electronic recordkeeping requirements as a result of the amendments to Rules 17a4f and j and to Rules 18a6e and g, respectively. For purposes of this Regulatory Flexibility Act RFA
analysis, the Commission refers to broker-dealers that might be deemed
PO 00000

Frm 00026

Fmt 4701

Sfmt 4702

small entities under the RFA as small entities.
Based on FOCUS Report data, the Commission estimates that as of June 30, 2021, approximately 1,439 of those broker-dealers might be deemed small entities for purposes of this analysis.
Based upon the Commissions prior RFA certification that adoption of Rule 18a6 would not have a significant economic impact on a substantial number of small entities for the purposes of the RFA,195 the Commission believes that no small entities will be affected by the proposed amendments to Rule 18a6.
D. Reporting, Recordkeeping, and Other Compliance Requirements The RFA requires a description of the projected reporting, recordkeeping, and other compliance requirements of the proposed amendments to Rules 17a4f and j and Rules 18a6e and g, including an estimate of the classes of small entities that would be subject to the requirements and the type of professional skill necessary to prepare required reports and records. Following is a discussion of the associated costs and burdens of compliance with the proposed amendments, as incurred by small entities.196
The Commission does not believe that the compliance costs of the proposed amendments would be significant. The Commission believes that the proposed audit-trail alternative to preserving electronic records would be consistent with existing broker-dealer practices.
Broker-dealers have explained to the Commission that the electronic recordkeeping systems used for business purposes are dynamic and updated constantly e.g., with each new transaction or position and easily accessible for retrieving records. The Commission believes that these contemporary electronic recordkeeping business systems, in many cases, can be configured to meet the audit-trail requirement in Rule 17a4f, as proposed to be amended. Moreover, small broker-dealers could continue to preserve records on electronic recordkeeping systems that meet the WORM requirement.
The proposed replacement of the required third-party access and undertakings requirements in Rule 17a 4f with a requirement that a senior officer of the broker-dealer have the access and make the required undertakings should reduce the burden 195 See SBSD/MSBSP Recordkeeping Adopting Release, 84 FR at 68645.
196 See section V.D.1, above describing costs for smaller broker-dealers, which could include brokerdealers that are small entities.

E:FRFM01DEP2.SGM

01DEP2