OATS Clock Synchronization Logs – Record Keeping Requirements.
April 4, 2003
Mr. Adam Zentner
Credit Suisse First Boston (Europe) Limited
One Cabot Square
London, England E14 4QJ
Re: OATS - Clock Synchronization Logs
Dear Mr. Zentner:
This is in response to your October 21, 2002 letter and subsequent telephone conversations, in which you request interpretive guidance regarding the maintenance of Credit Suisse First Boston, Inc.’s (“CSFB”) Order Audit Trail System (“OATS”) clock synchronization logs.
Based upon your letter and our subsequent conversations, I understand the facts to be as follows. CSFB is a registered broker/dealer under the Securities Exchange Act of 1934 and an NASD member. Pursuant to NASD Rule 6953, CSFB has synchronized and will maintain the synchronization of all business clocks that are used to record the date and time of any market event that must be recorded pursuant to the NASD By-Laws and Rules. In addition, CSFB maintains a log of the times when it synchronizes its clocks and the results of the synchronization process. You have requested guidance on the retention period, storage medium (e.g., disk, tape, optical, or paper) and appropriate location (e.g., on-site, disaster recovery building, or off-site tape backup storage) for maintaining CSFB’s OATS clock synchronization logs.
NASD Rule 6953 states, in pertinent part, that each member shall maintain the synchronization of its business clocks in conformity with such procedures as are prescribed by NASD. The OATS Reporting Technical Specifications (“Technical Specifications”) document sets forth, among other things, the requirements and procedures for clock synchronization. The April 14, 2003 edition of the Technical Specifications states that member firms must document and maintain their clock synchronization procedures, and members should keep a log of the times when they synchronize their clocks and the results of the synchronization process, including notice of any time the clock drifts more than three seconds. Further, the Technical Specifications prescribes the retention period, accessibility, and format for the OATS clock synchronization logs. Specifically, the Technical Specifications states that the clock synchronization logs should be maintained for the period of time and accessibility specified in SEC Rule 17a-4(b), which requires that records be preserved for at least three years, the first two years in an accessible place. The Technical Specifications also states that the OATS clock synchronization logs should be maintained and preserved for the required time period in either paper format or in a format permitted under SEC Rule 17a-4(f). Rule 17a-4(f) provides that records may be immediately produced or reproduced on “micrographic media” or by means of “electronic storage media.” Therefore, CSFB should retain its OATS clock synchronization logs in conformity with the period of time and accessibility requirements of SEC Rule 17a-4(b), and it should maintain these logs in paper format or in a format permitted under SEC Rule 17a-4(f). For interpretive guidance regarding SEC Rules 17a-4(b) and 17a-4(f), you may contact the SEC’s Division of Market Regulation, Office of Interpretation and Guidance.
I hope that this letter is responsive to your request. Please note that the opinions expressed herein are staff opinions only and have not been reviewed or endorsed by the NASD Board of Governors. This letter responds only to the issues you have raised based on the facts as you have described them, and does not address any other rule or interpretation of NASD, or all the possible regulatory and legal issues involved.
Very truly yours,
|cc:||Cathleen Shine, Senior Vice President and Director
NASD District Office (New York - District 10)