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Addressing the Retention Challenges of Proposed FINRA Rule 4516

Level 2

The Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 11-48 last month to request public comment on a proposed new rule requiring carrying/clearing organizations to maintain various records for FINRA, the SEC and the Securities Investor Protection Corporation.  If the new rule – proposed FINRA Rule 4516 (Readily Identifiable and Accessible Records) – is adopted by the SEC, it would provide additional justification for certain financial services companies to deploy automated archiving software such as Enterprise Vault to address the challenges of regulatory recordkeeping.

The purpose of proposed FINRA Rule 4516 is to protect investors in the event a clearing organization can no longer continue to operate due to financial or operational problems.  A clearing organization is an entity through which futures and other derivative transactions are cleared and settled.  They are charged with assuring the proper conduct of each contract’s delivery procedures and the adequate financing of trading.  In the event a clearing organization experiences financial or operational difficulties (such as Lehman Brothers in 2008), regulators typically need to access the records reflecting customer accounts and transaction records.  The proposed rule would require clearing organizations to keep copies of those records and make them “immediately available” to regulators.  A complete list of the records that clearing organizations would have to maintain can be found in the regulatory notice and proposed rule.

The prospect that clearing organizations may have to comply with this new recordkeeping regulation is further justification for deploying Symantec Enterprise Vault.  Enterprise Vault can fulfill FINRA’s expectation that organizations keep the required records “in one central location."  FINRA 11-48, p.2, n.3.  With Symantec Data Classification Services, Enterprise Vault can also meet FINRA’s requirement that records stored electronically be “uniquely tagged and appropriately indexed so as to be readily identifiable as such and accessible from the member firm’s principal office.”  FINRA 11-48, p.2, n.4.  Lastly, the Clearwell Discovery Platform allows organizations to rapidly search and retrieve the required records from Enterprise Vault such that they can be made "immediately available."  FINRA 11-48, p.6, subparagraph (c).

The comment period for the proposed rule closes on December 9, 2011.  We will keep you updated regarding any modifications to the proposed rule and/or whether its is approved by the SEC.