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Rule 17a-4 Compliance for Algorithmic Trading and Robo Advising Software

July 31, 2019

Financial institutions have supervisory and archiving regulatory requirements for software that performs automated investment strategies or interacts with markets or clients.  17a-4 LLC has a suite of services and products to bring software assets into compliance and mitigate IP risk.

Millbrook, NY – 17a-4, LLC announces software defined escrow services to meet clients’ Regulatory and IP needs.  Software has become a core company asset that requires secure escrow with appropriate chain-of-custody protections proving IP authorship.  Recognizing the extraordinary growth of software performing functions which underly the business activities of financial institutions, 17a-4 has set up a software-defined escrow service, leveraging the 17a-4 DataParser which allows clients to both meet the regulatory requirements and insure the protection of their IP assets.

The suite of services provides for:

  • Extraction of released software from a software development platform such as Slack;
  • Capture of release documentation including a written document describing the market impact for the software change;
  • Evidence of the review of the change by an authorized compliance officer;
  • Hash code process to establish chain-of-custody;
  • Delivery to Microsoft’s Azure Immutable Blob storage or other compliance archive for retention.

In the event of regulatory inquiry or arbitration involving algorithmic software, there is the need to prove the    institutional ownership of the code.  17a-4 will provide evidence of the hash and expert witness testimony as to the preservation process.

“We work with many clients who are basing their business on software either to trade, interact with clients or investment processes.  As such, it is critical that software changes be archived and supervised as any other process within the institution” offers Douglas Weeden, Director of Compliance at 17a-4, LLC.

Establishing Written Supervisory Procedures for the review of software is critical from a regulatory perspective.  It will be difficult for compliance teams to understand the implications of a software change which makes it all the more important that a senior member of the software development team documents the review of the software change and representation that the change will, in fact, result in description accompanying the release.  This relieves compliance of having to understand the code and focus instead that the change is consistent with industry regulations and internal institutional policies.  As part of the escrow offering, 17a-4 provides guidance with respect to best practices.

For more information.