17a-4’s Disclaimer Analysis and SEC Envelope Theory

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17a-4 has been analyzing the effects of email disclaimer language on compliance archives and supervision systems since 2015. Recent findings regarding the percentage of email message body text which constitutes disclaimer language shows a 75% increase over the past 3 years.

17a-4
... disclaimer language now constitutes over 28% of the text in the message body; a dramatic 75% increase over the past 3 years.

In February of 2015, 17a-4 LLC analyzed a sample of emails retained in financial institutional archives and found that disclaimer language constituted 16% of the text in the message body of archived emails. In January of this year, three years after the first study, 17a-4’s analysis of archived emails has revealed that disclaimer language now constitutes over 28% of the text in the message body; a dramatic 75% increase over the past 3 years. This increase not only requires more archival storage for what is essentially boiler-plate information but also increases the number of words which are flagged by supervisory systems.

17a-4’s Comment on Email Disclaimer Analysis Results

17a-4 associates this increase with two trends. First, that legal departments have told email administrators that all outgoing email should have an appended disclaimer. Second, that disclaimers have added language which may include confidentiality notices, what you are required to do if you are not the recipient, statements regarding requests to purchase or sell securities via email or information about regulatory coverage including FDIC, FINRA or other regulatory authority.

The Securities and Exchange Commission has consistently embraced what is referred to as the ‘Envelope Theory'. This guidance allows that if a hyperlink is included in an electronic document or email, the content referenced by that hyperlink is considered to reside in the same ‘envelope'. Thus, a hyperlinked disclaimer is considered a part of the message as is, for instance, an attachment.

17a-4 asserts, therefore, that a hyperlinked email disclaimer provides a solution to longer and more complicated disclaimer language. However, there are several concerns. First, financial institutions should not re-use a URL, otherwise, the integrity of the disclaimer at the time of the message may not have appropriate ‘chain of custody'. Second, there should be some means to prove that the URL and the linked disclaimer language are, in fact, the same.

17a-4’s Solution

17a-4’s product, e-Disclaimer, addresses both concerns by having a separate URL for each disclaimer. More, the URL has an embedded a hash code which is calculated from the disclaimer language. The hash provides the integrity of the link and of the actual disclaimer language at the time of the email. 17a-4 also provides independent 3rd party testimony should a question ever arise as to what was the actual disclaimer at the time of the message.

“We provide our e-Disclaimer service at no charge to our D3P (Designated 3rd Party for Rule 17a-4(f)(3)(vii)) clients or at a modest charge to financial institutions,” says Charles Weeden, Managing Partner. “We want the benefits of this very simple solution to be widely shared by the financial industry.”

Visit 17a-4.com for more information.

About 17a-4 LLC:

17a-4 is a compliance services and software company with a focus on e-messaging and software solutions to meet regulatory and e-discovery needs of institutional clients. Clients leverage 17a-4’s expertise to ensure information infrastructures comply with SEC (Rule 17a-4), FINRA and CFTC (Rule 1.31) regulations.

17a-4 offers the DataParser for messaging compliance and the SEC-FINRA DeskTop a hosted platform for SEC and FINRA documents and regulatory workflows. 17a-4’s architecture provides for a single-point in which all e-messaging content may be managed for retention, legal and regulatory holds and e-discovery productions.

17a-4 is based in New York City but operates remote offices nationwide.

All product and company names herein may be trademarks of their registered owners.

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Katherine Hayes
17a-4 llc
+1 (212) 949-1724
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