A Brief Guide to Compliant Document Storage

The amount of client information and financial data financial advisors handle each day is staggering. Meeting all the compliance regulations when it comes to data storage can be daunting. And the cost in terms of SEC penalties and your firm’s reputation is high.

You don’t have to look hard to find violations when it comes to document storage. The average cost of a data breach in the financial industry is $6 million. We’re delivering a brief guide to compliant document storage that will show you how cloud storage can help keep you from having a cloud of possible SEC penalties following you around.

Reviewing Rule 17a-4

Compliance starts with understanding the rule and all of its nitty-gritty details. Rule 17a-4 specifically allows and governs the storage of documents in an electronic format and applies to broker-dealers. 

We know reading the rule may not be on your list of things to do today, so instead, here are our 7 key takeaways:

1. Unaltered data: You must preserve records in a non-rewritable, non-erasable format. This is often referred to as “write once, read many,” or WORM. All records must be kept for at least six years.
2. Ensured integrity: The system you use “must verify automatically the quality and accuracy of the storage media recording process.” This ensures the integrity of the records both during the initial recording and any post-recording sessions.
3. Serialized and indexed: You must have the ability to locate a specific record quickly by serializing and indexing the original and any duplicates. You will want your system to assign a unique identifier for each record as well as a time and date of the recording for each record.
4. Easily downloaded: The system must allow you to download records easily. Presumably, this is so that the SEC can have them turned over without much fuss.
5. Duplicated elsewhere: You have to have a duplicate copy stored somewhere else so that if the original data is lost, damaged, or inaccessible, you have a backup. The duplicate records also must be serialized and indexed the exact same way as the originals.
6. Separate indexes: The duplicate copies have to be stored separately from the original copy of each index. This seems redundant but actually isn’t. You most certainly don’t want to lose the ability to search the data should you lose the storage of data. And both the original and duplicate indexes have to be preserved for the same time period required for the records.
7. Audit system: The system must leave an audit trail to track any and all activity of the records and indexes. The audit trail should show exactly when and who modified any of the records.

Storage in the Cloud

With all of the ins and outs of staying compliant, storing your documents in the right system can help efficiency and bring peace of mind for broker-dealers.

Things have evolved. There’s a reason the SEC amended Rule 17a-4 in 1997 to allow broker-dealers to store records electronically. Physical storage when it comes to compliant document storage is a nightmare in logistics and a time suck. Not to mention, who has the room anymore for all that localized file storage in this world of hybrid or remote work?

Storing your documents in the cloud instead introduces a whole slew of customized sharing options that include setting permissions and time windows to ensure private information stays as private as it should. Plus, you can organize and secure your files in a uniform manner so your advisors aren’t trying to chase down the right directory or doing so without following the same set of standards across the firm.

The stakes and cost are too high to rely on a paper system. Advisors already spend an average of 4.2 hours per week on administrative duties like document uploading and storage. And as we already noted, the average cost of a data breach in the financial industry is $6 million.

Safe Storage

Your clients likely won’t care how you store their data until it’s too late and their sensitive information has been compromised. Firms that experience those kinds of data breaches end up taking major, sometimes permanent, hits to their reputation.

Skience Safe offers best-in-class SEC 17a-4 compliant cloud storage that makes sure your clients’ information and your firm’s reputation are kept safe and secure. 

Out of the gate, Skience Safe can shave hours off your team’s workload by automating the process of uploading and directing mountains of documents to the proper storage place. This automation ensures your team’s files are exactly where they need to be without you needing to remind everyone where everything goes.

Skience Safe’s built-in record retention requirements are customizable and include built-in guidelines to maximize ease-of-use for advisors and assist with intuitive compliance. Time-based permissions for shared files and private folders also allow advisors to share a file with someone without opening the permanent portals to clients’ information. And it will automatically upload and index Salesforce notes and attachments.

Discover more about transforming your firm’s compliant document storage solution. Schedule a demo today!