Study Finds Small Securities Firms Falling Short in Compliance With SEC Email Archiving Regulations

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More than one in three are not yet archiving; one in five are not even aware they must archive.

Intradyn, the leader in simple, low-cost solutions for automated email compliance, announced today surprising findings from a research study it has completed on the subject of email retention to comply with government regulations in the securities industry. The objective of the study, based on a research project of the University of St. Thomas in St. Paul, Minn., was to survey small to midsized securities firms (broker-dealers) to ascertain their current practices for archiving email, or their plans to do so, to meet SEC requirements, which are the strictest of such regulations across all industry.

SEC-regulated firms must maintain a secure, non-alterable, and searchable archive of all their email for as long as seven years in some instances, or face stiff penalties and fines. Examples of such fines over recent years are these: a group of large Wall Street brokerages was fined in 2003 a collective $1.4 billion for violations that included email transgressions; in late 2004, several lesser-sized firms were fined a total of $3.65 million, part of which was for improper archiving of email messages; soon after, JP Morgan was fined $2.1 million to settle accusations that it failed to retain e-mails sought in investigations of stock research analyst misconduct; and, in July 2005, a much smaller brokerage in Pennsylvania, Hornor Townsend & Kent, was fined $325,000 for violations that included failing to retain the email communications of 83 employees.

The number of firms affected by the SEC’s email retention regulations is expanding, since hedge funds – 8,000 additional firms according to the Wall Street Journal – must become compliant by February 1, 2006.

In the Intradyn survey, a single individual at each broker-dealer firm was interviewed at length – either the compliance officer (or the principal charged with that responsibility) or, if not available, the IT manager. Firms were selected for the survey on an “nth name” basis across the entire U.S. from the National Association of Securities Dealers (NASD) membership list – but only firms of less than 100 employees were contacted. This category makes up approximately 94% of the NASD’s membership.

• 36% of the firms surveyed were not yet archiving email

• 20% said they were not even aware of the requirements

• 80% of the firms that were not currently archiving have plans to do so

It should be noted that more than half of the broker-dealers contacted refused to participate in the survey, apparently due to concerns about not being compliant, even though their privacy was assured. (These firms were not counted in the study results noted above.) The conclusion that can be drawn is that many small securities firms, perhaps even a majority, are not in compliance with SEC 17a-4, NASD 3010 email archiving regulations– either due to ignorance, or to the cost and complexity of previously available automated email archiving solutions to become compliant.

Other Studies’ Findings

Results from other surveys support the results of the Intradyn study and highlight the growing attention being placed on email archiving and email management. In a poll conducted this month by online publication Compliance Pipeline (published by CMP), 59% of the respondents – across all industry – said they were not archiving their electronic communications (email, instant messages) as business records. Only 27% said they have an archiving system in place. Another 13% indicated they didn’t know whether electronic communications were being archived.

In May a survey conducted by Forrester Research of email decision-makers at U.S. firms, respondents said 24.7% of outgoing emails contain content that poses a legal, financial, or regulatory risk. And 10.5% of the companies surveyed had been ordered by a court or regulatory body to produce email within the past year.

A Large and Growing Market

The research firm Radicati Group, in a June 2005 report, stated that revenues for e-mail archiving vendors are expected to approach $465 million in 2005, and grow to more than $4.4 billion by 2009. (The report is entitled “E-Mail Archiving Market, 2005-2009.”)

Intradyn’s Email Archiving Solution

The ComplianceVault™ appliance from Intradyn is comarketed with Sony Electronics (NYSE: SNY). It is an integrated hardware/software solution that captures all a user company’s email on a continuous basis, from a virtually unlimited number of mailboxes – storing all email messages on both hard disk and unalterable media (Sony® AIT™ WORM tape). The product is an easy-to-use appliance that connects quickly to the network to give smaller firms powerful email search and retrieval capabilities, with the ability to control the device from any web browser. It works with Microsoft® Exchange™, Lotus Notes®, Novell Groupwise®, or any IMAP or POP3 email server. It can be quickly installed, requires no integration or IT expertise, and allows the administrator to search the content of up to one million emails per second by keywords, date or range of dates, or by mailbox/user. In addition, it has an audit feature that tracks all access to the system. For more information about the ComplianceVault™ Email Archiving & Retrieval Appliance, featuring Sony AIT tape technology, see For a white paper published jointly by Intradyn and Sony, entitled “Email-Archiving Regulatory Compliance for Small to Midsized Businesses (SMBs),” go to

More information is available at the company’s web site,, or by calling 651-203-4600.            

Press Contact:

Tony Keller

S&S Public Relations

719- 634-8279

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Gary Doan
651 203-4600
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