What is SEC Compliance & Who Needs To Comply?

What is SEC Compliance?

The Securities and Exchange Commission (SEC) rules 17a-3 and 17a-4 specify recordkeeping requirements with respect to purchase and sale documents, customer records, associated person records, customer complaints, and certain other matters. In addition, they describe the types of records that broker-dealers must maintain and require broker-dealers to maintain or promptly produce certain records at each office to which those records relate. These are specifically designed to assist securities regulators when conducting sales practice examinations of broker-dealers, particularly examinations of local offices.

 

Required records include asset and liability ledgers, income ledgers, customer account ledgers, securities records, order tickets, trade confirmations, trial balance sheets, trade blotters, and various employment related documents

Who needs to comply with SEC?

SEC compliance is for financial services firms. It specifies the minimum requirements with respect to the records that broker-dealers must make, and how long those records and other documents relating to a broker-dealer's business must be kept.

 

The SEC 17a-4 rule states that broker-dealers must retain specific records and account transactions in a certain manner for a specific period of time. This data must be preserved on permanent, non-rewritable form of media. It should be thoroughly indexed and searched and readily retrievable. Brokers and dealers are also required to write down and enforce retention policies. The Commission, self-regulatory organizations ("SROs"), and State Securities Regulators may conduct effective examinations of broker-dealers from time to time for compliance.

What are the document management functionalities required to effectively maintain SEC compliance?

  • A Secure Database: Documents must be encrypted and each individual user sign into the software with individual logins and passwords to access these documents.
  • Automated Retention: All account, investment purchase, and insurance applications, must be maintained at least through the duration of the purchase period or account life
  • Role Based Security: The ability to lock down the documents to users based on job function and individual need-to-know basis is critical to ensuring that private information remains private, even from a rogue employee
  • Audit Trails: Audit trails should be undeletable and unalterable
  • Backup: If your institution experiences a system failure, inadequate backup can put you in violation of SEC rules

How does LuitBiz DMS help you become SEC compliant?

Rule

What it means

How LuitBiz DMS helps

§ 17a-3 Records Retention

Every member, broker and dealer subject to Rule 17a-3 shall preserve for a period of not less than six years, the first two years in an easily accessible place, all records required to be made pursuant to paragraphs Rule 17a3(a)(1), (a)(2), (a)(3), (a)(5), (a)(21), (a)(22), and analogous records created pursuant to Rule 17a-3(f).

All documents and records are "easily accessible" for not only two years, but for the duration of their existence in LuitBiz DMS unless document deletion periods are specified by LuitBiz Admin.

§ 17a-4(f)(2)(ii)(A) Record Protection

Preserve the records exclusively in a nonrewriteable, non-erasable format.

In LuitBiz DMS documents cannot be erased unless specified by the admin. The group leaders can lock the version control mechanism of documents making them nonrewriteable.

§ 17a4(f)(2)(ii)(D) Record Retrieval

Have the capacity to readily download indexes and records preserved on the electronic storage media to any medium acceptable under this paragraph (f) as required by the Commission or the self regulatory organizations of which the member, broker, or dealer is a member.

All documents and records can be easily retrieved and downloaded in LuitBiz DMS by persons with the right privileges to do so.

§ 17a-4(f)(3)(iv)(A) Document Profiling

Organize and index accurately all information maintained on in storage media.

In LuitBiz DMS documents can be searched based on meta data like key words, description, Boolean operators, creation dates, etc. Additionally, group leaders can define document tagging templates that can be used by users to index documents and retrieve them easily. Document OCR facility of LuitBiz DMS allows users to search through scanned images.

§ 17a - d(7) Version Control

Track different document versions for each change or addition.

The built-in version control mechanism of LuitBiz DMS allows users to store and retrieve different versions of their documents.

§ 240.17a-4 Security & Data Backup

It is not only important to store all the data on a medium where it can’t be modified or deleted but also protect them from theft and natural calamities.

All documents stored in LuitBiz DMS are encrypted using AES-256 technology for enhanced security and decrypted while rendering the documents in the software. Additionally, LuitBiz DMS backs up all files and audit trails automatically for easy retrieval.

§ 240.17 a-3 & a-4 Audit Trail

The member, broker, or dealer must have in place an audit system providing for accountability regarding inputting of records required to be maintained and preserved.

LuitBiz DMS maintains complete audit trail of documents of who has done what on the document and when.

§ 17a-3(a)(17) Customer Complaint Management

Broker/dealers should maintain files of written materials relating to customer complaints.

LuitBiz DMS allows the admin user to maintain nonconformity logs and the corrected action taken ensuring conformity with SEC rules 17a-3 and 17a-4 regulations.