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lotter on DSK11XQN23PROD with PROPOSALS2

Federal Register / Vol. 86, No. 228 / Wednesday, December 1, 2021 / Proposed Rules there other information that would be necessary to achieve the objective of the requirement? If so, please identify it.
Should the Commission add a requirement for a periodic audit to confirm that the auditable system of controls is working as appropriate? If so, should the required audit be internal or external?
15. Is the proposal to eliminate the requirement that a broker-dealer engage a third party with access to the firms electronic records who undertakes to provide them to the Commission and other securities regulators appropriate? 105 If so, explain why. If not, explain why not. Further, is the proposal to modify this requirement so that a senior officer of the broker-dealer must have access to the records and undertake to provide them to the Commission appropriate? If so, explain why. If not, explain why not. Should the Commission require that a second senior officer at all times have independent access to and the ability to provide the records and to execute the undertakings? If so, explain why. If not, explain why not. For example, would this increase insider cybersecurity risk compared to the proposed approach?
Would switching from a third party to a senior officer reduce cybersecurity risk compared with the current third-party requirement? If so, explain why. If not, explain why not. Would switching to a senior officer provide the Commission and other securities regulators with adequate means to obtain records if the broker-dealer refuses to produce them in the normal course? If so, please explain.
If not, explain why not.
16. What type of senior officer could fulfill the proposed access and undertakings requirements? For example, which senior officers have access to electronic recordkeeping systems? Are there any circumstances in which the senior officer would not be an associated person? Should the Commission specify which officers or officers with specific responsibilities and reporting lines that would be appropriate to provide the senior officer undertakings? If so, please identify them and explain why it would be appropriate for them to provide the undertakings.
17. Is the proposal to eliminate the option to place in escrow and keep current a copy of the physical and logical file format of the electronic storage media, the field format of all different information types written on the electronic storage media, and the source code, together with the 105 See section II.E. of the release discussing these proposed amendments.

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appropriate documentation and information necessary to access records and indexes, appropriate? If not, explain why. For example, do broker-dealers use this option?
18. Do broker-dealers or SBS Entities use micrographic media to store regulatory records? If not, should the Commission delete the option to use micrographic media in Rule 17a 4f? 106 If so, should the Commission add an option to use micrographic media to Rule 18a6e? Are the current requirements in Rule 17a4f for broker-dealers using micrographic media consistent with this technology as it exists today? If so, explain why. If not, explain why not. Should the current requirements be updated? If so, explain how.
19. Should the Commission adopt a sunset provision after which time broker-dealers would no longer be able to use micrographic media? If so, explain why or why not. If not, please describe broker-dealers continued use of micrographic media to store records.
Would any broker-dealers incur costs in moving from micrographic media to paper or electronic storage media? If so, identify and explain the costs.
Moreover, do broker-dealers continue to preserve records using paper, rather than electronic storage methods, to fulfill the record preservation requirements of Rule 17a4? If so, please provide data as to the frequency of such use.
20. Are the proposed amendments to paragraphs j and g of Rules 17a4
and 18a6, respectively, that would require firms to furnish a record and its audit trail if applicable preserved on an electronic recordkeeping system pursuant to paragraph e of this section in a reasonably usable electronic format, if requested by a representative of the Commission, appropriate? 107 If not, explain why.
IV. Economic Analysis The Commission is mindful of the economic effects, including the costs and benefits, of the proposed amendments. Section 3f of the Exchange Act provides that whenever the Commission is engaged in rulemaking pursuant to the Exchange Act and is required to consider or determine whether an action is necessary or appropriate in the public interest, the Commission shall also consider, in addition to the protection of investors, whether the action will 106 See section II.F. of the release discussing these proposed amendments.
107 See section II.G. of the release discussing these proposed amendments.

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promote efficiency, competition, and capital formation.108 In addition, Section 23a2 of the Exchange Act requires the Commission, when making rules under the Exchange Act, to consider the impact such rules would have on competition.109 Exchange Act Section 23a2 also provides that the Commission shall not adopt any rule which would impose a burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act.
The analysis below addresses the likely economic effects of the proposed amendments, including the anticipated and estimated benefits and costs of the amendments and their likely effects on efficiency, competition, and capital formation. The Commission also discusses the potential economic effects of certain alternatives to the approaches taken in this proposal. Many of the benefits and costs discussed below are difficult to quantify. For example, the Commission cannot quantify the number of entities that may already have electronic recordkeeping systems compliant with the proposed requirements; the extent to which some broker-dealers and SBS Entities may need to upgrade existing electronic recordkeeping systems to meet the proposed audit-trail requirement and costs thereof; or the degree to which broker-dealers and SBS Entities may currently pass along recordkeeping costs to customers and counterparties. While the Commission has attempted to quantify economic effects where possible, much of the discussion of economic effects is qualitative in nature.
A. Baseline To assess the economic effects of the proposed amendments, the Commission is using as the baseline the broker-dealer and security-based swap markets as they exist at the time of this release, including applicable rules the Commission has already adopted, but excluding rules the Commission has proposed but not yet finalized.
With respect to broker-dealers, the regulatory baseline includes Rules 17a 4f and j. In addition, as discussed above, the Commission has also issued interpretations of Rule 17a4f for broker-dealers.110 With respect to SBS
108 See
15 U.S.C. 78cf.
15 U.S.C. 78wa2.
110 See Section II.D discussing Rule 17a4f Interpretation. See SBSD/MSBSP Recordkeeping Adopting Release, 84 FR at 68568. As discussed above, the Commission would interpret the WORM
requirement as set forth in the text of paragraph e2iB of Rule 18a6, as proposed to be amended, consistently with how the WORM
109 See
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