FINRA advised firms using third-party recordkeeping service providers ("providers") to ensure that contracts comply with recent guidance issued by the SEC Division of Trading and Markets staff.
As previously covered, the SEC guidance stated that contractual provisions that would permit providers to delete or discard records in the event of non-payment by the broker-dealer are inconsistent with the retention requirements of Exchange Act Rule 17a-4, 17a-3 and the undertaking requirements of Rule 17a-4(i). The guidance states that if a provider deletes or discards broker-dealer records in a manner that is not consistent with the retention requirements of Rule 17a-4, such action would constitute a primary violation of the rule by the broker-dealer and may subject the provider to secondary liability for causing or aiding and abetting the violation.
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