The SEC Rule 17a-4(f) requirement that electronic records required to be preserved be stored in a non-rewriteable, non-erasable (WORM) format that prevents alteration or deletion, with additional audit-system and duplicate-storage safeguards.
Practice questions using Electronic Recordkeeping
Original questions written against the published FINRA and NASAA exam content outlines — not actual exam questions. Every choice is explained.
True or false: A firm satisfies its electronic recordkeeping obligation for a required record as long as the record is stored on non-rewriteable media, even if the firm cannot retrieve and produce that specific record within a reasonable time when requested.
A.TrueWrong. Non-alterable storage addresses only the integrity of the record; prompt retrievability is a separate and equally required element of the recordkeeping standard.
B.FalseCorrect. Retention rules require both tamper-resistant storage and the ability to produce the record promptly — satisfying one without the other still leaves a deficiency.
Why: The requirement has two independent parts: the storage medium must prevent alteration or erasure, and the firm must also be able to promptly locate and produce the record on request. Satisfying only the media requirement leaves the obligation incomplete.
A firm stores its required electronic records on a system that allows any employee with administrative access to edit or delete files after they are created. What is the concern with this setup under the electronic recordkeeping requirements?
A.None, because electronic recordkeeping format requirements apply only to trade confirmationsWrong. The preservation format requirement is not limited only to trade confirmations among required records.
B.None, since the records remain stored and available somewhere on the systemWrong. Mere availability is not the standard; the required preservation format specifically prevents alteration or deletion.
C.The system does not preserve records in a non-rewriteable, non-erasable format, which required electronic records generally must useCorrect. Editable or deletable storage does not satisfy the WORM-type preservation standard applicable to required electronic records.
D.None, as long as only administrative-level employees have edit or delete accessWrong. Limiting who has edit or delete access does not satisfy a preservation standard that requires the records not be alterable at all.
Why: Electronic records subject to retention requirements generally must be preserved in a non-rewriteable, non-erasable format (commonly known as WORM -- write once, read many). A system that permits editing or deletion after creation does not satisfy that preservation standard, regardless of how convenient it is operationally.
Finance Exam Pro is not affiliated with FINRA, NASAA, or any exam sponsor. Practice questions are original and are not actual exam questions. Rules change — confirm current requirements with the relevant regulator.