Data archiving is one of the key issues facing organizations these days. Across different countries and industries, there are more than a few laws and regulations that form the legal framework regulating archiving. However, have you ever wondered how these rules came to be?
Understanding the pretext and context of these regulations is critical to meet the expectations of regulatory authorities. Read on as we discuss in this post the events and legal actions that motivated governments and regulatory bodies to create laws that specifically address the issues in record retention.
1. U.S Freedom of Information Act (FOIA)
Created in 1967, the FOIA provides the public the right to request access to records from any federal agency. The law only applies to federal agencies and does not grant access to records held by the Congress, the courts, or by the state or local government agencies.
What Caused It?
The law was initially championed by Congressman John Moss in 1955 after several proposals during the Cold War led to a steep rise in government secrecy. Despite his opposition, President Lyndon B. Johnson signed the bill into law on July 4, 1966, and it went into effect the following year.
Though the 1966 bill was a massive step towards government transparency, FOIA lacked the teeth necessary to force government agencies to comply. It was not until 1974, after the Watergate scandal and the tight-lipped Nixon administration, that Congress amended FOIA to become the bill it is today. The Senate and the House introduced many new requirements, deadlines, sanctions for wrongly withheld information, and necessary language waiving fees for journalists and public interest groups.
2. U.S Dodd-Frank Act and Consumer Protection Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act is financial reform legislation which made changes in the American financial regulatory environment that affected all federal financial regulatory agencies and almost every part of the nation’s financial services industry.
What Caused It?
Passed in 2010 in response to the financial crisis in 2008, the Dodd-Frank includes numerous provisions that are intended to lessen the risks in the U.S. financial system. Its Title VII – Wall Street Transparency and Accountability – explicitly concerns regulation of over-the counter swaps that were the subject of several bank failures in the year 2007. The section includes mandatory recordkeeping rules for Swap Dealers (SD) and Major Swap Participants (MSP) – all are intended to ensure efficient, secure, and transparent spot markets and derivative financial markets.
3. U.S Sarbanes-Oxley Act
The Sarbanes-Oxley Act of 2002 addresses corporate fraud. It created the Public Company Accounting Oversight Board to oversee the accounting industry. The major highlight of this act is the power it holds to punish CEOs who are personally responsible for errors in accounting audits.
What Caused It?
Until 2002, the Securities Act of 1933 regulated securities by requiring companies to publish prospectus about any publicly-traded stocks it issued. However, while this regulation can hold corporations legally responsible, it has no power to prosecute executives that are personally liable for accounting audit errors.
The Enron fraud is arguably the primary driver that led to the creation of the SOX. Andrew Fastow, the Chief Financial Officer, managed the production of off-balance sheet entities with the effect of creating an unrealistic picture of the company’s financial health. In certain instances, the CFO was also responsible for managing the off-balance sheet vehicles in which he had a financial interest. Essentially, such unethical practice is done to inflate the company’s stock prices.
When it came into force, SOX prohibited auditors from doing consulting work for their auditing clients, preventing the conflict of interest which led to the Enron fraud.
4. U.S FINRA (FINRA Regulatory Notice 07-59)
The Financial Industry Regulatory Authority sets various requirements on the capture, monitoring, and archival of broker communications, and supervisory review process demands.
What Caused It?
FINRA issued the Regulatory Notice 07-59 in June 2007 due to the supervisory challenges firms face given the ever-increasing pace in electronic communications technology. It serves as the final guidance for members to consider when developing systems and procedures for managing electronic communications such text messaging.
5. Investment Industry Regulatory Organization of Canada (IIROC 29.7)
IIROC 29.7 requires that all client correspondence and related documents — including all forms of electronic communications — must be retained for five years from the date of creation. Also, all sales literature and associated records must be preserved for two years from the date of creation. Archived sales literature and correspondence must be readily available for inspection by the Association at all times.
What Caused It?
IIROC was established as a non-profit corporation on June 1, 2008, through the consolidation of the Investment Dealers Association of Canada (IDA) and Market Regulation Services Inc. (RS). IIROC 29.7 is just one of the regulations that are intended to enhance investor protection, maintaining fair, efficient and transparent markets and reducing risk to the Canadian financial system.
6. Markets in Financial Instruments Directive (MiFID II)
In October 2011, the European Commission proposed to revise the MiFID II with the aim of making financial markets more efficient, resilient and transparent, and to strengthen the protection of investors. Under MiFID II, there is a more granular requirement for investment firms to provide required information to NCAs. These enhanced records will assist National Competent Authorities (NCA) in confirming whether a company has complied with its obligations in respect to its behavior relating the integrity of the market.
What Caused It?
The original MiFID was intended to be the pillar of European Union (EU) efforts to create a single financial market for the bloc that could rival the depth and vigor of the U.S. capital markets. However, due to the global financial crisis which revolved around over the counter (OTC) derivative exposure and trade scandals such as the LIBOR and FX rigging scandals, the EU moved to create an enhanced version of MiFID.
Created in 2014, and going into effect on January 3, 2018, the new MiFID II has a much more extensive jurisdictional range. Also, much of the trade reporting requirements were published in a separate document called, Markets in Financial Instruments and Amending Regulation (MiFIR) that has 55 articles of its own.
See Also: Infographic: Preparing for MiFID II
Contact TeleMessage today to learn how our Mobile Archiver solutions can help your organization comply with these recordkeeping laws and regulations.
