Serena S Chan is a an Associate Partner with IBM Global Business Services Financial Services Sector in Toronto, Canada. She has over 20 years of Management Consulting experience. Serena has experience helping a diverse range of clients to develop their corporate strategies and implementation, particularly those relating to Enterprise Portal, Content Management, Document Management and Records Management.
She co-authored three IBM Redbooks publications: IBM WebSphere Portal V5 Handbook, Portlet Application Development with IBM WebSphere Portal Toolkit V5 and Working with IBM Records Manager.
Serena holds her Honors Degree in Bachelor of Commerce (H.BCom.) from the University of Toronto and a Master of Science Technology (M.Sc.) in Computer Information degree from the Regis University.
The Securities and Exchange Commission, the New York Stock Exchange and NASD fined 5 broker-dealers for violations of recordkeeping requirements regarding e-mail communications. The firms consented to the imposition of fines totaling $8.25 million, along with a requirement to review their procedures to ensure compliance with record-keeping statues and rules.[1 ]
When is the last time your company reviewed your company's Records Management policies, procedures, and practices against some of the common issues?
Increased regulation and changes to legal statutes and rules have made records management a business necessity for almost every company. Some of the industry drivers include the following:
- Increase in information governance awareness
- Increased government and industry regulation
- Changes in legal procedures and requirements
- Business continuity concerns
How regulations and law come into play
If you look at the legislation landscape of Financial Services sector in Records Management in North America, it is full of very specific requirements about how and where certain records and information must be retained. Unfortunately, there is no single set of rules to follow.
The following are some U.S. pertinent legislation or requirements requiring financial institutions to secure records.
The selected following are pertaining to Securities Trading:
- Securities Exchange Act (SEA) 1934
SEC Act of 1934 for broker-dealers and transfer agents section 17a requires securities brokers, dealers, investment companies, financial advisers, and transfer agents to keep records of electronic interoffice communications and communications with customers.
Sec. 240.17a-1 Recordkeeping rule for national securities exchanges, national securities associations, registered clearing agencies and the Municipal Securities Rulemaking Board.
Sec. 240.17a-2 Recordkeeping requirements relating to stabilizing activities.
Sec. 240.17a-3 Records to be made by certain exchange members, brokers and dealers.
Note: 17a-3 requires that all members of a national securities exchange, including all brokers and dealers, must keep current variety of books and records that relate to their businesses.
Sec. 240.17a-4 Records to be preserved by certain exchange members, brokers and dealers.
Note: 17a-4 requires some records that must be retained by brokers and dealers must be preserved for at least six years, the first two years in an easily accessible place, while other records must be retained for at least three years, the first two years in an easily accessible place.
Note: 17a-4 requires broker-dealers to maintain records electronically using a digital storage medium that preserves the records exclusively in a non-rewriteable, non-erasable format.
Sec. 240.17f-1 Requirements for reporting and inquiry with respect to missing, lost, counterfeit or stolen securities.
Sec. 240.17f-2 Fingerprinting of securities industry personnel.
Sec. 240.17h-1T Risk assessment recordkeeping requirements for associated persons of brokers and dealers.
Sec. 240.17Ad-6 Recordkeeping.
Sec. 240.17Ad-7 Record retention.
Sec. 240.17Ad-11 Reports regarding aged record differences, buy-ins and failure to post certificate detail to master security holder and subsidiary files.
Sec. 240.17Ad-15 Signature guarantees.
- Investment Company Act (IC) 1940
Sec. 270.31a-1 Records to be maintained by registered investment companies, certain majority-owned subsidiaries thereof, and other persons having transactions with registered investment companies
Sec. 270.31a-2 Records to be preserved by registered investment companies, certain majority-owned subsidiaries thereof, and other persons having transactions with registered investment companies
Sec. 270.31a-3 Records prepared or maintained by other than person required to maintain and preserve them
Sec. 270.38a-1 Compliance procedures and practices of certain investment companies
- Investment Advisors Act (IA) 1940
The Investment Advisors Act rule 204-2 establishes record keeping requirement for books and records to be maintained by Investment Advisers.
Sec. 275.204-2 Books and records to be maintained by investment advisers.
- CEA (Commodity Exchange Act) & CFTC
Sec. 1.31 Books and records; keeping and inspection
Sec. 1.32 Segregated account; daily computation and record
Sec. 1.33 Monthly and confirmation statements
Sec. 1.34 Monthly record, point balance
Sec. 1.35 Records of cash commodity, futures, and option transactions
Sec. 1.36 Record of securities and property received from customers and option customers
Sec. 1.37 Customer's or option customer's name, address, and occupation recorded; record of guarantor or controller of account
Sec. 1.39 Simultaneous buying and selling orders of different principals; execution of, for and between principals
Sec. 42.2 Compliance with Bank Secrecy Act
The selected following are pertaining to Banking:
- Federal Deposit insurance Corp (FDIC)
Sec. 9.8 Recordkeeping
Sec. 27.3 Recordkeeping requirements
Sec. 27.5 Record retention period
- Office of Thrift Supervision (OTS)
Sec. 551.50 What records must be maintained for securities transactions
Sec. 551.60 How records must be maintained
The selected following are pertaining to Self Regulatory Organization (SRO):
- National Association of Securities Dealers (NASD)
Note: NASD rules 2711, 3010 and 3110 requires that member firms establish and maintain a system to supervise the activities of each registered representative, including transactions and correspondence with the public.
Rule 2210 Communications with the Public
Rule 3010 Supervision
Rule 3011 Anti-Money Laundering Compliance Program
Rule 3060 Influencing or Rewarding Employees of Others
Rule 3110 Books and Records
Rule IM-3110 Customer Account Information
Rule 3115 3115. Requirements for Alternative Trading Systems to Record and Transmit Order and Execution Information for Security Futures
- New York Stock Exchange (NYSE)
The NYSE rule 440 requires brokers and dealers to make and preserve books and records as prescribed by the NYSE.
The following includes some of the other regulations:
- Bank Secrecy Act (Anti-money laundering statutes and rules)
The Bank Secrecy Act requires businesses to keep records and file reports that are determined to have a high degree of usefulness in criminal, tax, and regulatory matters. Agencies use these documents to identify, detect, and deter money laundering whether it is in furtherance of a criminal enterprise, terrorism, tax evasion or other unlawful activity. Businesses must report cash payments of over $10 000 received in trade or business from one buyer as a result of a single transaction or as a result of two or more related transactions.
- State Statutes
State or local laws also govern the requirement of record keeping. Each state has its own jurisdiction, depending upon the state where you are located.
- Sarbanes Oxley Act (SOX)
The Sarbanes Oxley Act requires that audit firms which audit companies governed by the SEC to retain all relevant documentation to protect mishandling of information.
- Gram-Leach-Bluely Act
The Gram-Leach-Bluely Act is a U.S. Federal law enacted to control ways that financial institutions to deal with private information for individuals.
- The Office of Foreign Assets Control
The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign countries, terrorists, international narcotics traffickers, and those engaged in activities related to the proliferation of weapons of mass destruction.
- "SEC, NYSE, NASD Fine Five Firms Total of $8.25 Million for Failure To Preserve E-Mail Communications," SEC press release, December 03, 2002. Information taken from the Internal Revenue Service Web site.
- For more information about record management, see IBM Redbooks publication Understanding IBM Enterprise Records, SG24-7623-01.
- A quick view of IBM Enterprise Records
- IBM Enterprise Records System Architecture Overview
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