SEC Rule 17a-4 Rule Amendment – Books and Records

The SEC approved a rule amendment that is now effective and impacts SEA Rule 17a-4(f) as well as certain aspects of the broker-dealer’s recordkeeping requirements, including but not limited to recordkeeping services provided by third-parties.

Broker-dealers that rely on third-party vendors need to request an updated 17a-4 Undertaking Letter from the vendor and received it by the compliance date of May 3, 2023 at the latest. Once the new 17a-4 Undertaking Letter is obtain, the Undertaking Letter will need to be filed with the Designated Examining Authority (DEA) (e.g., FINRA, etc.).

Funding Portals may note that Reg CF Rule 404’s Undertaking Letter requirement did not change as part of this rule amendment.

There are additional changes to the rule, including in regards to electronic books and records maintenance, such as instead of a sole ‘write once, read many’ (‘‘WORM’’) format requirement there is now also an alternative whereby “…a broker-dealer will need to use an electronic recordkeeping system that maintains and preserves electronic records in a manner that permits the recreation of an original record if it is modified or deleted.” (aka “audit-trail alternative”)

Fact Sheet: https://www.sec.gov/files/34-96034-fact-sheet.pdf
Final Rule: https://www.govinfo.gov/content/pkg/FR-2022-11-03/pdf/2022-22670.pdf