Notice Regarding Year 2000 System Issues
Year 2000 system issues could present numerous problems for dealers in their municipal securities and other activities. For example, dealers could experience computer programs that will not accept settlement dates in the Year 2000, various computational models that are inaccurate or unworkable and difficulty in calculating interest payments and maturity dates for municipal securities that mature after the Year 2000. Dealers also may experience problems as a result of certain software programs that do not recognize correct dates in the year 1999 and beyond. Accurate output from computer systems is vital to dealers' recordkeeping and operations, and dealers currently should be taking steps to avoid problems as a result of the Year 2000 date change.
The Board urges all dealers to undertake and implement the actions necessary to achieve Year 2000 compliance. These changes should include all information technology ("IT") systems (both internal and external), as well as non-IT systems (e.g., elevators, heating and air, telephones, etc.). Dealers are obligated, pursuant to Board rules, to keep accurate books and records. The Board is publishing this notice to advise dealers that computer failures or problems arising as a result of the Year 2000 generally will not excuse a dealer's failure or inability to comply with all applicable Board rules, including, but not limited to, rule G-8 on record-keeping.(1)
May 20, 1998
1. Dealers also should be aware that the NASD has stated that "Year 2000 problems generally will not be considered a defense to violations of firms' regulatory or compliance responsibilities nor a mitigation of sanctions for such violations." See NASDR, Inc., Regulatory & Compliance Alert (March 1998) at pages 1 and 3.
In addition, the SEC has issued an advisory notice on its books and records rules relating to the Year 2000. The SEC stated that Rule 17a-3 under the Securities Exchange Act of 1934, among other things, requires broker-dealers to make and keep current certain books and records relating to the broker-dealer's business. Any broker-dealer whose computer systems have not been modified to address Year 2000 Problems may have records that are inaccurate or not current. Consequently, the SEC advises that a broker-dealer with computer problems caused by the Year 2000 may be deemed in violation of the requirement in SEC Rule 17a-3 to have accurate books and records. Moreover, any broker-dealer that fails to make and keep current books and records would be required to notify the SEC under Rule 17a-11. See SEC Release No. 34-39734; 63 FR 12056 (March 12, 1998).
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