SEC Allows Advisors to Rely on Vendor to Retain Confirms
The SEC’s Division of Investment Management has issued a No-Action Letter to the vendor of an electronic recordkeeping and trade confirmation service allowing adviser customers to rely on the vendor’s system to comply with the Adviser Act’s recordkeeping rule for retention of trade confirmations. The vendor’s system electronically transmits trade confirmations from broker-dealers that effect customer transactions to the advisers placing the trades. Without no-action relief, an adviser would be required to download or print the electronic confirms in order to comply with the recordkeeping rule (204-2). The relief granted allows advisers to rely on the vendor’s record retention provided the vendor (a) makes the confirms available through computers located at the adviser, (b) retains at least two copies for 5 years, and (c) continues to make the records accessible in the event the vendor ceases business or terminates the client relationship.
OUR TAKE: The SEC has generally recognized the use of third party record retention systems to comply with the recordkeeping rule. However, firms should make sure that such reliance may require no-action relief.