Problem
As the industry shifts to digital documents and cloud storage, broker-dealers face challenges meeting 17a-4’s specific WORM (Write Once, Read Many) requirements. Common problems include:
Lack of Immutability: Traditional cloud storage solutions may allow accidental overwrites or edits.
Disorganized Archives: Files scattered across local drives, email attachments, or multiple vendors can make it difficult to produce records within specified timeframes.
Retrievability & Indexing Gaps: SEC rules require that records be readily searchable and easily retrievable. Many broker-dealers rely on outdated, inefficient archives that complicate compliance audits.
Costly Fines: Even minor infractions—like failing to properly index or maintain files on a non-erasable format—can lead to enforcement actions and significant penalties.
WHO: Every broker-dealer governed by SEC Rule 17a-4 must ensure the proper retention and safekeeping of certain records in a non-rewriteable, non-erasable (WORM) format. This includes client statements, trade confirmations, account records, and other critical documents. While many large broker-dealers have their own archival systems, small- and mid-sized firms often rely on third-party or cloud-based storage. Regardless of the storage solution, Rule 17a-4 mandates strict requirements around immutability, retrievability, and auditability of archived records.
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Firms Fined for Inadequate Influencer Marketing Supervision
In March 2024, M1 Finance was fined $850,000 for social media posts made by influencers on the firm’s behalf that were not fair or balanced, or contained exaggerated, unwarranted, promissory or misleading claims. This was first social media influencer-related FINRA Enforcement disciplinary action. As M1 Finance did not review or approve the content in its influencers’ posts prior to use or retain those communications, the findings also stated that M1 Finance failed to have a reasonable system…for supervising the communications that the firm’s influencers made on its behalf.
In April 2024, Cobra Trading, Inc. was fined $200,000 for findings that it paid influencers for promotional communications on social media platforms while the communications were not fair and balanced or made claims that were promissory. Cobra Trading did not review or approve influencers’ videos prior to their publication and did not maintain records of influencers’ videos or the dates they were used, but also failed to establish and maintain a supervisory system…to supervise its influencers’ retail communications.
In June 2024, TradeZero America was fined $250,000 for findings that its influencer communications were not fair and balanced and included exaggerated and promissory statements. Amongst the findings that the broker-dealer did not reasonably supervise its retail communications posted by influencers for compliance with FINRA Rule 2210(d)(1), the firm did not establish or maintain a supervisory system…to preserve records of influencers’ videos or their dates of use.
RULE REQUIREMENTS
SEC Rule 17a-4
Non-rewriteable, Non-erasable Format:
Firms must retain certain records in a WORM format or an equivalent digital medium that ensures the records are unalterable.
Retention Periods:
Depending on the document type, records must be maintained for specified retention periods—commonly three or six years.
Indexing & Accessibility:
Must maintain an organized index of stored records and ensure they’re easily retrievable within the timeframe required by the rule (often same-day or next-day retrieval).
Audit Trail:
Regulators may require a time-stamped proof of when documents were created, or modified.
Relevant Regulatory Notices and Guidance
SEC Guidance Update
On Electronic Storage (2023): Reinforces the requirement for WORM compliance and addresses emerging cloud technologies.
FINRA Regulatory Notice 11-39
While focusing on social media, it also affirms the importance of preserving electronic communications in an immutable format.
SEC Risk Alert (2024)
Urges broker-dealers to regularly test and validate the immutability of their record storage systems.
Solution
Knowtice Analytics’s 17a-4 Cloud Storage is purpose-built to help broker-dealers securely and seamlessly meet SEC 17a-4 and FINRA recordkeeping standards. By leveraging WORM-compliant architecture and robust indexing features, our system ensures your electronic records are immutable, organized, and readily retrievable.
Key Features
WORM Architecture
Files are stored in a non-rewriteable, non-erasable format to meet regulatory mandates.
Automatic hashing confirms data integrity and immutability.
Centralized Repository
All broker-dealer records—trade confirmations, client statements, account forms—are archived in a single, cloud-based platform.
Advanced tagging/indexing allows quick filtering and searching by date, client account number, document type, or keywords.
Audit Trail & Permissions
Every upload is logged with a detailed time stamp to produce a verifiable audit trail
Fast Retrieval
Lightning-fast search engine to find and retrieve records within the required 24-hour timeframe.
Regulators and internal auditors have on-demand access to archived data for swift reviews.
Additional Benefits
Scalable Cloud Infrastructure
Encryption & Security
Optional Managed SFTP
