SEC Rule 17a-4: Electronic Recordkeeping Requirements Explained

What is SEC Rule 17a-4?

SEC Rule 17a-4 under the Securities and Exchange Act of 1934 defines the recordkeeping and retention requirements for broker-dealers, including security-based swap dealers (SBSDs) and major security-based swap participants (MSBSPs).

Amended in October 2022, the rule modernized how electronic records are stored and accessed, offering firms greater flexibility while maintaining regulatory integrity.

In short, Rule 17a-4 ensures that all communications, transaction data, and related documents are complete, accurate, and accessible for regulatory review.

Electronic recordkeeping requirements

At its core, Rule 17a-4 requires firms maintain written and electronic records that are:

• Complete and accurate across all channels of communication
• Retained for the required time periods, with the two most recent years immediately accessible
• Available in a “human-readable and reasonably usable” format for regulators upon request

Two options for maintaining electronic records

The 2022 amendments to SEC 17a-4 replaced rigid technical requirements with two compliance pathways:

1. WORM format (write once, read many):

   Firms can choose immutable storage where data, once written, cannot be altered or deleted. This ensures an unchangeable audit trail of communications and transactions.

2. Audit-trail method:

   Alternatively, firms can use systems that track and log every modification or deletion made to records. This approach requires technology capable of reproducing accurate audit trails through the record’s lifecycle.

Each method carries trade-offs in cost, operational complexity, and speed of regulatory response. Many firms evaluate their infrastructure, resources, and supervisory needs before deciding which model best fits their compliance program.

Third-party recordkeeping requirements

Any third party that prepares or maintains a broker-dealer’s regulatory records — whether in paper or electronic form — must file a written undertaking with the SEC.

This undertaking, signed by an authorized representative, must include a commitment to:

• Permit SEC representatives to examine the firm’s records
• Promptly furnish true, complete, and current copies upon request

Alternative: Designated executive officer (DEO) appointment
Instead of using an external third party, firms may appoint a Designated Executive Officer (DEO) to file the undertaking directly with the SEC.

The DEO assumes personal responsibility for record accessibility and compliance readiness – an option often favored by larger firms with mature compliance infrastructure.

Penalties for Rule 17a-4 non-compliance

Failure to comply with Rule 17a-4 can lead to:

• Significant fines or disgorgement
• Suspension or revocation of a firm’s right to operate in U.S. markets
• Potential criminal charges in serious or repeated cases

How Smarsh helps firms meet Rule 17a-4 compliance

Smarsh delivers an end-to-end, AI-powered compliance platform that simplifies regulatory recordkeeping and supervision.

With Smarsh, you can:

• Preserve complete and accurate digital communications records
• Enable fast access to regulatory requests in human and regulatory usable formats
• Capture, preserve, and enable playback of all communications in native format
• Provide letters of undertaking to applicable regulatory bodies

Learn more about how Smarsh supports broker-dealer compliance.

Related resources

• Blog: The Modernization of SEC 17a-4
• Guide: The Modernization of SEC 17a-4
• Podcast: The Modernization of SEC 17a-4

FAQs: SEC Rule 17a-4 compliance

1. What is SEC Rule 17a-4?
   SEC Rule 17a-4 is a recordkeeping regulation under the Securities Exchange Act of 1934 that requires broker-dealers, security-based swap dealers (SBSDs), and major security-based swap participants (MSBSPs) to maintain and preserve complete, accurate, and accessible records for regulatory inspection.

2. What are the electronic recordkeeping requirements under Rule 17a-4?
   Firms must retain written and digital communications in a format that is complete, accurate, and human-readable, with the two most recent years of records immediately accessible for regulators.

3. What are the two options for maintaining electronic records under Rule 17a-4?
   The SEC allows firms to use either WORM (Write Once, Read Many) storage for immutable retention or an audit-trail system that logs all changes or deletions made to records.

4. Who can file the required undertaking with the SEC?
   A third-party recordkeeping provider or a Designated Executive Officer (DEO) of the broker-dealer can file the written undertaking to guarantee regulator access to stored records.

5. How does Smarsh help firms comply with SEC Rule 17a-4?
   Smarsh provides an AI-powered compliance archiving platform that captures, preserves, and supervises communications across 100+ channels, supporting both WORM and audit-trail retention methods to help firms meet Rule 17a-4 recordkeeping obligations.