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SEC 17a-4: What you need to know and how Concentric AI can help with compliance

July 13, 2023
Cyrus Tehrani
4 min read

What is the SEC Rule SEC 17a-4

SEC Rule 17a-4 is a regulation issued by the U.S. Securities and Exchange Commission (SEC) under the U.S. Securities Exchange Act of 1934. It imposes specific requirements on organizations operating in the financial services industry — like stockbrokers and brokerage firms — regarding electronic data storage, including retention period, discoverability, accessibility, and accountability.

What rules must financial firms follow?

Under Rule 17a-4, financial companies have to keep a record of their transactions in a way that can’t be easily altered or erased. They need to be able to quickly pull up these records if asked for the first two years. For the next four years, they still need to keep these records and be able to show them if requested. Duplicate records must be kept at an off-site location for the same duration. Other communications, including written communication, emails, and instant messages, should also be retained for three to six years, depending on the documents.

In the context of SEC Rule 17a-4, “non-immediate access” refers to the requirement that certain records must be accessible, but not necessarily instantly. This means that while the records must be retrievable and readable, they do not need to be available for immediate viewing or downloading. For instance, if a regulatory body or auditor requests certain records, the organization must provide them with the understanding that there may be a reasonable delay in retrieving and producing these records. Even for non-immediate access, the delay should still be within an acceptable timeframe as defined by the regulation or the requesting authority.

Who enforces regulations and what are the penalties for non-compliance?

The Financial Industry Regulatory Authority (FINRA), a non-profit group authorized by the U.S. Congress, enforces regulation. Firms are constantly scrutinized, and FINRA can levy significant fines for non-compliance. These fines can be anywhere from $1,000 to over $140,000 for each breach. Other penalties include temporary suspension or expulsion of the responsible individual/party and/or the entire company, depending on the nature of the breach.

Organizations face several challenges in complying with this regulation, including ensuring proper retention for all record types, storing records in a non-rewriteable, non-erasable format, managing scattered systems for record discovery and retrieval, and passing audits to avoid penalties.

It is crucial for organizations to comply with this rule to avoid penalties and ensure they are prepared for potential audits.

The 5 steps to compliance

To start your path to SEC Rule 17a-4 compliance, here are the five key steps you’ll need to focus on:

Discover: Identify your relevant data and know where it resides.

Index: Create and maintain an index of all data for easy retrieval.

Store: Ensure data is stored in a non-rewriteable, non-erasable format.

Preserve: Preserve records for the required period and ensure they are easily accessible.

Audit: Prepare for potential audits by having a third-party download and access your digital records.

How Concentric AI can help you stay compliant

Concentric AI uses three key steps to help ensure compliance with SEC Rule 17a-4:

  • Discover and identify data
  • Monitor and classify data for risk
  • Remediate data risk issues

Discover and Identify Data

Data discovery and identification is a crucial step in achieving SEC Rule 17a-4 compliance. Concentric AI’s solution uses sophisticated machine learning technologies to autonomously scan and categorize data — from financial data to PII/PHI/PCI to intellectual property to business confidential information – wherever it is stored. In the cloud, on-premises, structured or unstructured… Concentric will find it. Our solution helps you understand what data your company holds, determines the legal ramifications for processing data, assesses the risk associated with processing data, and allows you to respond to audit requests.

Monitoring and Classifying Data for Risk

With Concentric AI, you can autonomously discover how SEC Rule 17a-4 data is being used, who it is being shared with, and who accessed it — to quickly and accurately pinpoint risk from inappropriate permissioning, risky sharing, and unauthorized access. Data classification is an important step in achieving SEC Rule 17a-4 compliance because it enables companies to identify, categorize, and organize their data according to its level of sensitivity and importance.

Remediate Data Risk Issues

Concentric AI’s Risk Distance™ analysis leverages deep learning to compare each data element with baseline security practices used by similar data to identify risk without rules and policies. More importantly, our solution can remediate these access risks as they happen – whether it’s fixing access control issues or permissions, disabling sensitive file sharing with a third party, or blocking an attachment on a messaging service.

Concentric Semantic Intelligence helps you discover and protect your most sensitive and confidential information without any rules, upfront work or security team overhead.

Utilizing Deep Learning, Concentric Semantic Intelligence™ autonomously delivers a content-based, categorized view of your data and a risk rating for all data that have been exposed. This allows your data security, privacy, and compliance teams to easily find and correct inappropriate sharing, unauthorized access or wrong entitlements of sensitive data to efficiently prevent data loss.

More than just compliance

Our customers are successfully using our product in production for petabytes of data for:

Book a demo today to see firsthand — with your own data — how Concentric’s solution can quickly and easily be deployed to keep up with regulations like SEC 17a-4 in your organization.


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