View all text of Subjgrp 113 [§ 240.18a-1 - § 240.18a-10]
§ 240.18a-6 - Records to be preserved by certain security-based swap dealers and major security-based swap participants.
This section applies to the following types of entities: A security-based swap dealer registered pursuant to section 15F of the Act (15 U.S.C. 78o-10) that is not also a broker or dealer, including an OTC derivatives dealer as that term is defined in § 240.3b-12, registered pursuant to section 15 of the Act (15 U.S.C. 78o); and a major security-based swap participant registered pursuant to section 15F of the Act that is not also a broker or dealer, including an OTC derivatives dealer, registered pursuant to section 15 of the Act. Section 240.17a-4 (rather than this section) applies to the following types of entities: A member of a national securities exchange who transacts a business in securities directly with others than members of a national securities exchange; a broker or dealer who transacts a business in securities through the medium of a member of a national securities exchange; a broker or dealer, including an OTC derivatives dealer, registered pursuant to section 15 of the Act; a security-based swap dealer registered pursuant to section 15F of the Act that is also a broker or dealer, including an OTC derivatives dealer, registered pursuant to section 15 of the Act; and a major security-based swap participant registered pursuant to section 15F of the Act that is also a broker or dealer, including an OTC derivatives dealer, registered pursuant to section 15 of the Act.
(a)(1) Every security-based swap dealer and major security-based swap participant for which there is no prudential regulator must preserve for a period not less than six years, the first two years in an easily accessible place, all records required to be made pursuant to § 240.18a-5(a)(1) through (4).
(2) Every security-based swap dealer and major security-based swap participant for which there is a prudential regulator must preserve for a period not less than six years, the first two years in an easily accessible place, all records required to be made pursuant to § 240.18a-5(b)(1) through (3).
(b)(1) Every security-based swap dealer and major security-based swap participant for which there is no prudential regulator must preserve for a period of not less than three years, the first two years in an easily accessible place:
(i) All records required to be made pursuant to § 240.18a-5(a)(5) through (9) and (12) through (18).
(ii) All check books, bank statements, cancelled checks, and cash reconciliations.
(iii) All bills receivable or payable (or copies thereof), paid or unpaid, relating to the business of such security-based swap dealer or major security-based swap participant, as such.
(iv) Originals of all communications received and copies of all communications sent (and any approvals thereof) by the security-based swap dealer or major security-based swap participant (including inter-office memoranda and communications) relating to its business as such. As used in this paragraph (b)(1)(iv), the term “communications” includes sales scripts and recordings of telephone calls required to be maintained pursuant to section 15F(g)(1) of the Act (15 U.S.C. 78o-10(g)(1)).
(v) All trial balances and computations of net capital or tangible net worth requirements (and working papers in connection therewith), as applicable, financial statements, branch office reconciliations, and internal audit working papers, relating to the business of such security-based swap dealer or major security-based swap participant as such.
(vi) All guarantees of security-based swap accounts and all powers of attorney and other evidence of the granting of any discretionary authority given in respect of any security-based swap account, and copies of resolutions empowering an agent to act on behalf of a corporation.
(vii) All written agreements (or copies thereof) entered into by such security-based swap dealer or major security-based swap participant relating to its business as such, including agreements with respect to any account. Written agreements with respect to a security-based swap customer or non-customer, including governing documents or any document establishing the terms and conditions of the customer's or non-customer's security-based swaps must be maintained with the customer's or non-customer's account records.
(viii) Records which contain the following information in support of amounts included in the report prepared as of the audit date on Part II of Form X-17A-5 (§ 249.617 of this chapter) and in annual financial statements required by § 240.18a-7(d):
(A) Money balance and position, long or short, including description, quantity, price, and valuation of each security, including contractual commitments, in security-based swap customers' accounts, in fully secured accounts, partly secured accounts, unsecured accounts, and in securities accounts payable to security-based swap customers;
(B) Money balance and position, long or short, including description, quantity, price, and valuation of each security, including contractual commitments, in security-based swap non-customers' accounts, in fully secured accounts, partly secured accounts, unsecured accounts, and in security-based swap accounts payable to non-security-based swap customers;
(C) Position, long or short, including description, quantity, price, and valuation of each security, including contractual commitments, included in the Computation of Net Capital as commitments, securities owned, securities owned not readily marketable, and other investments owned not readily marketable;
(D) Description of futures commodity contracts or swaps, contract value on trade date, market value, gain or loss, and liquidating equity or deficit in customers' and non-customers' accounts;
(E) Description of futures commodity contracts or swaps, contract value on trade date, market value, gain or loss and liquidating equity or deficit in trading and investment accounts;
(F) Description, money balance, quantity, price, and valuation of each spot commodity and swap position or commitments in customers' and non-customers' accounts;
(G) Description, money balance, quantity, price, and valuation of each spot commodity and swap position or commitments in trading and investment accounts;
(H) Number of shares, description of security, exercise price, cost, and market value of put and call options, including short out of the money options having no market or exercise value, showing listed and unlisted put and call options separately;
(I) Quantity, price, and valuation of each security underlying the haircut for undue concentration made in the Computation of Net Capital pursuant to § 240.18a-1;
(J) Description, quantity, price, and valuation of each security and commodity position or contractual commitment, long or short, in each joint account in which the security-based swap dealer or major security-based swap participant has an interest, including each participant's interest and margin deposit;
(K) Description, settlement date, contract amount, quantity, market price, and valuation for each aged failed to deliver requiring a charge in the Computation of Net Capital pursuant to § 240.18a-1;
(L) Detail relating to information for possession or control requirements under § 240.18a-4 and reported on Part II of Form X-17A-5 (§ 249.617 of this chapter);
(M) Detail of all items, not otherwise substantiated, which are charged or credited in the Computation of Net Capital pursuant to §§ 240.18a-1 and 240.18a-2, such as cash margin deficiencies, deductions related to securities values and undue concentration, aged securities differences, and insurance claims receivable;
(N) Detail relating to the calculation of the risk margin amount pursuant to § 240.18a-1(c)(6); and
(O) Other schedules which are specifically prescribed by the Commission as necessary to support information reported as required by § 240.18a-7.
(ix) The records required to be made pursuant to § 240.15c3-4 and the results of the periodic reviews conducted pursuant to § 240.15c3-4(d).
(x) The records required to be made pursuant to § 240.18a-1(e)(2)(iii)(F)(1) and (2).
(xi) A copy of information required to be reported under §§ 242.901 through 242.909 of this chapter (Regulation SBSR).
(xii) Copies of documents, communications, disclosures, and notices related to business conduct standards as required under §§ 240.15Fh-1 through 240.15Fh-6 and 240.15Fk-1.
(xiii) Copies of documents used to make a reasonable determination with respect to special entities, including information relating to the financial status, the tax status, and the investment or financing objectives of the special entity as required under sections 15F(h)(4)(C) and (5)(A) of the Act (15 U.S.C. 78o-10(h)(4)(C) and (5)(A)).
(2) Every security-based swap dealer and major security-based swap participant for which there is a prudential regulator must preserve for a period of not less than three years, the first two years in an easily accessible place:
(i) All records required to be made pursuant to § 240.18a-5(b)(4) through (7) and (9) through (14).
(ii) Originals of all communications received and copies of all communications sent (and any approvals thereof) by the security-based swap dealer or major security-based swap participant (including inter-office memoranda and communications) relating to its business as a security-based swap dealer or major security-based swap participant. As used in this paragraph (b)(2)(ii), the term “communications” includes sales scripts and recordings of telephone calls required to be maintained pursuant to section 15F(g)(1) of the Act (15 U.S.C. 78o-10(g)(1)).
(iii) All guarantees of security-based swap accounts and all powers of attorney and other evidence of the granting of any discretionary authority given in respect of any security-based swap account, and copies of resolutions empowering an agent to act on behalf of a corporation.
(iv) All written agreements (or copies thereof) entered into by such security-based swap dealer or major security-based swap participant relating to its business as a security-based swap dealer or major security-based swap participant, including agreements with respect to any account. Written agreements with respect to a security-based swap customer or non-customer, including governing documents or any document establishing the terms and conditions of the customer's or non-customer's security-based swaps, must be maintained with the customer's or non-customer's account records.
(v) Detail relating to information for possession or control requirements under § 240.18a-4 and reported on Part IIC of Form X-17A-5 (§ 249.617 of this chapter) that is in support of amounts included in the report prepared as of the audit date on Part IIC of Form X-17A-5 (§ 249.617 of this chapter) and in the registrant's annual reports required by § 240.18a-7(c).
(vi) A copy of information required to be reported under Regulation SBSR (§§ 242.901 through 242.909 of this chapter).
(vii) Copies of documents, communications, disclosures, and notices related to business conduct standards as required under §§ 240.15Fh-1 through 240.15Fh-6 and 240.15Fk-1.
(viii) Copies of documents used to make a reasonable determination with respect to special entities, including information relating to the financial status, the tax status, and the investment or financing objectives of the special entity as required under sections 15F(h)(4)(C) and (5)(A) of the Act.
(c) Every security-based swap dealer and major security-based swap participant subject to this section must preserve during the life of the enterprise and of any successor enterprise all partnership articles or, in the case of a corporation, all articles of incorporation or charter, minute books, and stock certificate books (or, in the case of any other form of legal entity, all records such as articles of organization or formation and minute books used for a purpose similar to those records required for corporations or partnerships), all Forms SBSE (§ 249.1600 of this chapter), all Forms SBSE-A (§ 249.1600a of this chapter), all Forms SBSE-C (§ 249.1600c of this chapter), all Forms SBSE-W (§ 249.1601 of this chapter), all amendments to these forms, and all licenses or other documentation showing the registration of the security-based swap dealer or major security-based swap participant with any securities regulatory authority or the Commodity Futures Trading Commission.
(d) Every security-based swap dealer and major security-based swap participant subject to this section must maintain and preserve in an easily accessible place:
(1) All records required under § 240.18a-5(a)(10) or (b)(8) until at least three years after the associated person's employment and any other connection with the security-based swap dealer or major security-based swap participant has terminated.
(2)(i) For security-based swap dealers and major security-based swap participants for which there is not a prudential regulator, each report which a securities regulatory authority or the Commodity Futures Trading Commission has requested or required the security-based swap dealer or major security-based swap participant to make and furnish to it pursuant to an order or settlement, and each securities regulatory authority or Commodity Futures Trading Commission examination report until three years after the date of the report.
(ii) For security-based swap dealers and major security-based swap participants for which there is a prudential regulator, each report related to security-based swap activities which a securities regulatory authority, the Commodity Futures Trading Commission, or a prudential regulator has requested or required the security-based swap dealer or major security-based swap participant to make and furnish to it pursuant to an order or settlement, and each securities regulatory authority, Commodity Futures Trading Commission, or prudential regulator examination report until three years after the date of the report.
(3)(i) For security-based swap dealers and major security-based swap participants for which there is not a prudential regulator, each compliance, supervisory, and procedures manual, including any updates, modifications, and revisions to the manual, describing the policies and practices of the security-based swap dealer or major security-based swap participant with respect to compliance with applicable laws and rules, and supervision of the activities of each natural person associated with the security-based swap dealer or major security-based swap participant until three years after the termination of the use of the manual.
(ii) For security-based swap dealers and major security-based swap participants for which there is a prudential regulator, each compliance, supervisory, and procedures manual, including any updates, modifications, and revisions to the manual, describing the policies and practices of the security-based swap dealer or major security-based swap participant with respect to compliance with applicable laws and rules relating to security-based swap activities, and supervision of the activities of each natural person associated with the security-based swap dealer or major security-based swap participant until three years after the termination of the use of the manual.
(4) The written policies and procedures required pursuant to §§ 240.15Fi-3, 240.15Fi-4, and 240.15Fi-5 until three years after termination of the use of the policies and procedures.
(5)(i) Each written agreement with counterparties on the terms of portfolio reconciliation with those counterparties as required to be created under § 240.15Fi-3(a)(1) and (b)(1) until three years after the termination of the agreement and all transactions governed thereby.
(ii) Security-based swap trading relationship documentation with counterparties required to be created under § 240.15Fi-5 until three years after the termination of such documentation and all transactions governed thereby.
(iii) A record of the results of each audit required to be performed pursuant to § 240.15Fi-5(c) until three years after the conclusion of the audit.
(e) Subject to the conditions set forth in this paragraph (e), the records required to be maintained and preserved pursuant to § 240.18a-5 and this section may be immediately produced or reproduced by means of an electronic recordkeeping system and be maintained and preserved for the required time in that form.
(1) For purposes of this paragraph (e):
(i) The term electronic recordkeeping system means a system that preserves records in a digital format in a manner that permits the records to be viewed and downloaded;
(ii) The term designated executive officer means a member of senior management of the security-based swap dealer or major security-based swap participant who has access to and the ability to provide records maintained and preserved on the electronic recordkeeping system either directly or through a designated specialist who reports directly or indirectly to the designated executive officer;
(iii) The term designated officer means an employee of the security-based swap dealer or major security-based swap participant who reports directly or indirectly to the designated executive officer and who has access to and the ability to provide records maintained and preserved on the electronic recordkeeping system either directly or through a designated specialist who reports directly or indirectly to the designated officer;
(iv) The term designated specialist means an employee of the security-based swap dealer or major security-based swap participant who has access to, and the ability to provide records maintained and preserved on, the electronic recordkeeping system; and
(v) The term designated third party means a person that is not affiliated with the security-based swap dealer or major security-based swap participant who has access to and the ability to provide records maintained and preserved on the electronic recordkeeping system.
(2) An electronic recordkeeping system of a security-based swap dealer or major security-based swap participant without a prudential regulator must:
(i)(A) Preserve a record for the duration of its applicable retention period in a manner that maintains a complete time-stamped audit trail that includes:
(1) All modifications to and deletions of the record or any part thereof;
(2) The date and time of actions that create, modify, or delete the record;
(3) If applicable, the identity of the individual creating, modifying, or deleting the record; and
(4) Any other information needed to maintain an audit trail of the record in a way that maintains security, signatures, and data to ensure the authenticity and reliability of the record and will permit re-creation of the original record if it is modified or deleted; or
(B) Preserve the records exclusively in a non-rewriteable, non-erasable format;
(ii) Verify automatically the completeness and accuracy of the processes for storing and retaining records electronically;
(iii) If applicable, serialize the original and duplicate units of the storage media, and time-date the required period of retention for the information placed on such electronic storage media;
(iv) Have the capacity to readily download and transfer copies of a record and its audit trail (if applicable) in both a human readable format and in a reasonably usable electronic format and to readily download and transfer the information needed to locate the electronic record, as required by the staffs of the Commission, or any State regulator having jurisdiction over the security-based swap dealer or major security-based swap participant; and
(v)(A) Include a backup electronic recordkeeping system that meets the other requirements of this paragraph (e) and that retains the records required to be maintained and preserved pursuant to § 240.18a-5 and in accordance with this section in a manner that will serve as a redundant set of records if the original electronic recordkeeping system is temporarily or permanently inaccessible; or
(B) Have other redundancy capabilities that are designed to ensure access to the records required to be maintained and preserved pursuant to § 240.18a-5 and this section.
(3) A security-based swap dealer or major security-based swap participant using an electronic recordkeeping system must:
(i) At all times have available, for examination by the staffs of the Commission or any State regulator having jurisdiction over the security-based swap dealer or major security-based swap participant, facilities for immediately producing the records preserved by means of the electronic recordkeeping system and for producing copies of those records.
(ii) Be ready at all times to provide, and immediately provide, any record stored by means of the electronic recordkeeping system that the staffs of the Commission or any State regulator having jurisdiction over the security-based swap dealer or major security-based swap participant may request.
(iii) For a security-based swap dealer or major security-based swap participant operating pursuant to paragraph (e)(2)(i)(B) of this section, the security-based swap dealer or major security-based swap participant must have in place an audit system providing for accountability regarding inputting of records required to be maintained and preserved pursuant to § 240.18a-5 and this section to the electronic recordkeeping system and inputting of any changes made to every original and duplicate record maintained and preserved thereby.
(A) At all times a security-based swap dealer and major security-based swap participant must be able to have the results of such audit system available for examination by the staff of the Commission.
(B) The audit results must be preserved for the time required for the audited records.
(iv) Organize, maintain, keep current, and provide promptly upon request by the staffs of the Commission or any State regulator having jurisdiction over the security-based swap dealer or major security-based swap participant all information necessary to access and locate records preserved by means of the electronic recordkeeping system.
(v)(A) Have at all times filed with the Commission the following undertakings with respect to such records signed by either a designated executive officer or designated third party (hereinafter, the “undersigned”):
The undersigned hereby undertakes to furnish promptly to the U.S. Securities and Exchange Commission (“Commission”) and its designees or representatives, or any State securities regulator having jurisdiction over [Name of the Security-Based Swap Dealer or Major Security-Based Swap Participant], upon reasonable request, such information as is deemed necessary by the staff of the Commission or any State regulator having jurisdiction over [Name of the Security-Based Swap Dealer or Major Security-Based Swap Participant], to download copies of a record and its audit trail (if applicable) preserved by means of an electronic recordkeeping system of [Name of the Security-Based Swap Dealer or Major Security-Based Swap Participant] into both a human readable format and a reasonably usable electronic format in the event of a failure on the part of [Name of the Security-Based Swap Dealer or Major Security-Based Swap Participant] to download a requested record or its audit trail (if applicable).
Furthermore, the undersigned hereby undertakes to take reasonable steps to provide access to the information preserved by means of an electronic recordkeeping system of [Name of the Security-Based Swap Dealer or Major Security-Based Swap Participant], including, as appropriate, downloading any record required to be maintained and preserved by [Name of the Security-Based Swap Dealer or Major Security-Based Swap Participant] pursuant to §§ 240.18a-5 and 240.18a-6 in a format acceptable to the staff of the Commission or any State regulator having jurisdiction over [Name of the Security-Based Swap Dealer or Major Security-Based Swap Participant]. Specifically, the undersigned will take reasonable steps to, in the event of a failure on the part of [Name of the Security-Based Swap Dealer or Major Security-Based Swap Participant] to download the record into a human readable format or a reasonably usable electronic format and after reasonable notice to [Name of the Security-Based Swap Dealer or Major Security-Based Swap Participant], download the record into a human readable format or a reasonably usable electronic format at the request of the staff of the Commission or any State regulator having jurisdiction [Name of the Security-Based Swap Dealer or Major Security-Based Swap Participant].
(B) A designated executive officer who signs the undertaking required pursuant to paragraph (e)(3)(v)(A) of this section may:
(1) Appoint in writing up to two designated officers who will take the steps necessary to fulfill the obligations of the designated executive officer set forth in the undertakings in the event the designated executive officer is unable to fulfill those obligations; and
(2) Appoint in writing up to three designated specialists.
(C) The appointment of, or reliance on, a designated officer or designated specialist does not relieve the designated executive officer of the obligations set forth in the undertaking.
(f)(1)(i) If the records required to be maintained and preserved pursuant to the provisions of § 240.18a-5 and this section are prepared or maintained by a third party, including by a third party that owns and operates the servers or other storage devices on which the records are preserved or maintained, on behalf of the security-based swap dealer or major security-based swap participant, the third party must file with the Commission a written undertaking in a form acceptable to the Commission, signed by a duly authorized person, to the effect that such records are the property of the security-based swap dealer or major security-based swap participant and will be surrendered promptly on request of the security-based swap dealer or major security-based swap participant and including the following provision:
With respect to any books and records maintained or preserved on behalf of [SBSD or MSBSP], the undersigned hereby undertakes to permit examination of such books and records at any time or from time to time during business hours by representatives or designees of the Securities and Exchange Commission, and to promptly furnish to said Commission or its designee true, correct, complete, and current hard copies of any or all or any part of such books and records.
(ii)(A) If the records required to be maintained and preserved pursuant to the provisions of § 240.18a-5 and this section are maintained and preserved by means of an electronic recordkeeping system as defined in paragraph (e) of this section utilizing servers or other storage devices that are owned or operated by a third party (including an affiliate) and the security-based swap dealer or major security-based swap participant has independent access to the records as defined in paragraph (f)(1)(ii)(B) of this section, the third party may file with the Commission the following undertaking signed by a duly authorized person in lieu of the undertaking required under paragraph (f)(1)(i) of this section:
The undersigned hereby acknowledges that the records of [SBSD or MSBSP] are the property of [SBSD or MSBSP] and [SBSD or MSBSP] has represented: one, that it is subject to rules of the Securities and Exchange Commission governing the maintenance and preservation of certain records, two, that it has independent access to the records maintained by [name of third party], and, three, that it consents to [name of third party] fulfilling the obligations set forth in this undertaking. The undersigned undertakes that [name of third party] will facilitate within its ability, and not impede or prevent, the examination, access, download, or transfer of the records by a representative or designee of the Securities and Exchange Commission as permitted under the law.
(B) A security-based swap dealer or major security-based swap participant utilizing servers or other storage devices that are owned or operated by a third party has independent access to records with respect to such third party if it can regularly access the records without the need of any intervention of the third party and through such access:
(1) Permit examination of the records at any time or from time to time during business hours by representatives or designees of the Commission; and
(2) Promptly furnish to the Commission or its designee a true, correct, complete and current hard copy of any or all or any part of such records.
(2) Agreement with a third party will not relieve such security-based swap dealer or major security-based swap participant from the responsibility to prepare and maintain records as specified in this section or in § 240.18a-5.
(g) Every security-based swap dealer and major security-based swap participant subject to this section must furnish promptly to a representative of the Commission legible, true, complete, and current copies of those records of the security-based swap dealer or major security-based swap participant that are required to be preserved under this section, or any other records of the security-based swap dealer or major security-based swap participant subject to examination or required to be made or maintained pursuant to section 15F of the Act that are requested by a representative of the Commission. The security-based swap dealer and major security-based swap participant must furnish a record and its audit trail (if applicable) preserved on an electronic recordkeeping system pursuant to paragraph (e) of this section in a reasonably usable electronic format, if requested by a representative of the Commission.
(h) When used in this section:
(1) The term securities regulatory authority means the Commission, any self-regulatory organization, or any securities commission (or any agency or office performing like functions) of the States.
(2) The term associated person has the meaning set forth in § 240.18a-5(d).