July 2, 1999
Securities and Exchange Commission
450 Fifth Street, N.W. -- Mail Stop 0609
Washington, D.C. 20549-0609
RE: File No. S7-17-99; “Record Keeping Requirements for Transfer Agents”
Dear Mr. Katz:
Please find attached the comments of Storage Technology Corporation, StorageTek, to the Commission’s proposed rule making to address record keeping requirements for transfer agents, file number S7-17-99.
StorageTek is the preeminent provider of network computing storage. Our products and services are used to store, transport and secure more than 100 petabytes of the world's information, ranging from mainframe data to client/server applications to video, audio and still images.
We offer electronic storage technology solutions that meet the SEC broker/dealer criteria for record keeping and storage management, that we believe would also be of utility to transfer agents. A further explanation of the technology, and our replies to some of the questions posed by the Commission concerning electronic storage are addressed in our attached comments.
We would be happy to answer any additional questions the Commission staff or interested parties may have.
Christine A. Owens
Corporate Government Relations Manager
to File No. S7-17-99
Submitted by StorageTek
StorageTek applauds the efforts of the Commission to update its regulations to explicitly allow transfer agents to utilize computer imaging technology to meet their records retention requirements. We strongly agree with the statement in section I.A. of the Federal Register notice that, “Rule 17Ad-7 should be amended to accommodate a wider range of storage media.” Under Section I.B.1., the Commission is correct to say that there are “different types of electronic storage media available for record keeping purposes.” However, the rest of that section then focuses on only one type of imaging technology, optical disk systems, and gives the impression that it is the only, or at least the preferred, technology for records retention.
Preserve Technological Neutrality:
We urge the Commission to remain technology neutral in all its rule making procedures. While we understand that the Securities Transfer Association’s letter that helped initiate this process specifically refers to optical disk storage systems, StorageTek would like to emphasize that there are a number of other image recording technologies which may be suitable for use in a records retention system. Further, these other technologies may offer price and/or performance advantages over optical disk technology. We strongly recommend that the discussion in Section I.B.1. should either avoid mentioning any specific type of technology or be expanded to include all of the available and potential alternatives, such as magnetic disk and tape, magneto-optical disk and optical tape. Referring to optical disk while omitting other types of technology could have the unintended effect of tilting the playing field toward optical disk technology and limiting competition and innovation among imaging technology vendors. We note that the proposed rule itself identifies objective criteria for the storage system, rather than technical specifications, and is thus technology neutral. We simply urge that all the narrative sections of the final rule remain similarly neutral.
Types of Electronic Storage:
Section III asks whether new technologies are available for use in retaining records, and whether the final rule should allow for use of these technologies. As one might suppose from our above comments, indeed there are other technologies available which can store images safely and securely. Much of the technology StorageTek has to offer in this arena is actually not new. The magnetic tape recording technology that StorageTek offers is a known, tested and standardized technology that has been used to securely store sensitive, mission critical data for over 50 years. What is new are some additional features that StorageTek has developed to create tape storage systems that offer WORM (write-once-read-many) functionality.1
We urge the Commission to reword its statement that the “principal focus of the proposed amendments is on optical storage technology, which allows for digital data recording in a non-rewritable, non-erasable format that provides a permanent and unalterable record.” Rather, we believe the principal focus of the proposed amendments should simply be electronic storage systems that are at least equivalent to the paper or micrographic systems they would replace. Furthermore, we dispute the accuracy of the Commission’s statement, since no storage media (electronic or otherwise) can truly offer a permanent and unalterable record.” Optical disks can be stolen, destroyed, fraudulently replaced and erased just like any other storage medium. The fact that data on a WORM optical disk cannot be overwritten by new data in place does not make such data “nonerasable” or “nonrewritable.” It is simply one among many features that determine the level of security and permanence of an overall storage system.
For example, a critical attribute users should seek in a storage system is the ability to read the stored data in the future. Thus, it is most important to store data in a format that can be upgraded to other media in the future. In this respect, electronic storage of digitized images offers much greater future reliability than paper or micrographic storage. First, it is easier to have redundant copies of a digital ‘original’. As already recognized by the Commission in numerous contexts, redundancy helps guard against tampering, as well as against record destruction as a result of disasters. Multiple digital copies are possible at a much lower cost than attempting to create and store redundant copies in paper or micrographic format. Second, given that every media has a finite shelf-life, a digital copy will be more readily compatible with future developments in technology.
Comparison of Electronic Storage Media Available Today:
Within the realm of electronic storage media currently available, WORM tape offers significant cost and space benefits over optical storage. (See Table at Appendix A for a side-by-side comparison.)
The Commission correctly recognizes in its Federal Register Notice that optical disk is a relatively new technology and that there are no industry standards for development and compatibility among different optical disk storage systems. Of additional concern is the fact that optical disk may be a dying technology. Several of the large manufacturers of large format optical (12 and 14 inch media) have announced plans to exit that segment of the market. In contrast, as stated, tape is a well understood, proven technology that has been widely used for decades. There are no indications that tape will disappear anytime in the near future. In fact, companies like StorageTek have significant research and development investments in tape, and continue to introduce new tape products to demonstrate a strong commitment to the media.
In terms of monetary cost, tape is much more affordable than any other storage options. The price of tape is significantly less than optical disk. The total cost (hardware, software and services) of tape storage varies from less than a penny per megabyte up to six cents per megabyte. The cost of tape media by itself is often less than half a cent a megabyte without compression. Tape can also offer a four to one hardware compression factor, thus lowering the actual cost to one fourth of that amount. Optical is a much more expensive option. The cost of just the optical media by itself is two to three cents per megabyte and hardware compression is not available. The total cost (hardware, software and services) of optical runs from nine cents to twenty cents per megabyte of storage. The cost of micrographic storage is significantly more at $1.20 per megabyte. This figure continues to grow as the cost of retrieving micrographic documents includes the labor cost of leaving the work area and going to the location of the film and readers.
Conditions for Use of Electronic Storage:
The Commission also asks in its Federal Register Notice under what conditions the final rule should allow for the use of these technologies. We believe the conditions outlined in the proposed rule are appropriately technology-neutral but are unnecessarily burdensome and overly detailed. We believe it would be sufficient to simply state the records retention requirements and leave it to the transfer agents to choose the storage method that works best for them. As long as the agents have a sufficient incentive (staying in business, avoiding fines, etc.), they will make reasonable and prudent decisions about whether and when to utilize alternative technologies. This is the approach taken by the vast majority of regulatory bodies. Attached as Appendix B is a ‘White Paper’ prepared by StorageTek that outlines the approaches taken by various governmental departments and agencies. We realize the Commission has already addressed this issue with respect to broker/dealers and may wish to have consistent criteria for broker/dealers and transfer agents, but we respectfully suggest that the Commission reconsider the need for imposing such detailed records retention requirements.
Retention of Original Certificates:
In Section II the Commission states that "the storage and destruction of canceled securities certificates present issues unique to transfer agents' use of electronic media." It is unclear based on the publication what these unique issues are. StorageTek would urge clarification of this in the final rule. We believe there is already strong legal precedent to allow for the destruction of the original certificates when appropriate copies exist. The Uniform Photographic Records Act (UPRA), 28 U.S.C. 1732 provides explicit authority for the destruction of the original and the use of a copy in its place.
The UPRA states:
If any business, institution,
member of a profession or calling, or any department or agency of government,
in the regular course of business or activity has kept or recorded any
memorandum, writing, entry, print, representation or combination thereof,
of any act, transaction, occurrence, or event, and in the regular course
of business has caused any or all of the same to be recorded, copied, or
reproduced by any photographic, photostatic, microfilm, micro-card, miniature
photographic, or other process which accurately reproduces or forms a durable
medium for so reproducing the original, the original may be destroyed in
the regular course of business unless its preservation is required by law.
Such reproduction, when satisfactorily identified, is as admissible in
evidence as the original itself in any judicial or administrative proceeding...
To further address the question posed by the Commission as to the evidentiary requirements transfer agents may need to meet, copies are routinely admitted into evidence. See, Rules 1001(3), 1002 and 1003 of the Federal Rules of Evidence.
Optical disk is only one
type of electronic storage. There are a number of electronic storage
technologies that can meet the criteria set out by the Commission.
In comparing the technologies available today, WORM tape offers a number
of advantages over optical disk, micrographic media and paper. The
final rules issued by the Commission should simply state the records retention
requirements and leave it to the transfer agents to choose the storage
method that works best for them. A number of other Federal agencies
take this approach to the issue. Electronic storage and subsequent
destruction of original certificates should not pose special legal concerns,
or evidentiary complications for transfer agents. Legal precedents
already allow for such practices.
Comments to File No. S7-17-99
Submitted by StorageTek
Appendix A --Comparison of optical media versus magnetic tape technologies.
|Optical media:||Magnetic tape media:|
|Optical manufacturers have been unable to agree upon standards for the media. This means that new types of optical media are not always backward compatible with prior types. This increases the risk that records could be stored on media that will one day be obsolete.||Making recovery of important documents more difficult. Magnetic tape media is a well understood, tested, and standardized media for storing documents. Tape customers have long relied on the medium for over 50 years to store mission critical data, and ensure recovery of data in case of natural disasters. Even though the media has evolved tremendously, tape manufacturers have been able to rely on agreed upon standards. Thus, new tape technology has offered backward compatibility.|
of optical is significantly greater than the price magnetic tape.
||The price of tape is significantly
lower than the price of optical.
|The cost of discarding an optical platter is 4 or 5 times greater than discarding a tape cartridge. The cost of optical platters (15 to 25 gb) ranges from $400 to $500 a piece.||The cost of discarding a tape cartridge is 4 or 5 times less than discarding an optical platter. WORM tape cartridges (20 gb) cost $100 each.|
|Optical is not as scalable to large capacities as are magnetic tape systems. Maximum capacity for optical jukeboxes is one or two terabytes of information.||Magnetic tape is scalable to very large capacities. Magnetic tape libraries will hold up to 300 terabytes of information per silo, and over 20 silos can be connected for even greater capacities. This large capacity creates a platform for sharing of information enterprisewide as appropriate.|
|Optical technology may be a dying technology. Several manufacturers of large format optical (12 and 14 inch media) have announced that they are leaving this segment of the market. Gartner Group has projected that “the exodus of WORM optical disk drive (ODD) vendors will motivate 80% of current WORM users to migrate from ODD by 2001 (0.8 probability).”||Magnetic tape is being continuously enhanced for higher capacities, faster performance, and additional functionality.|
Comments to File No. S7-17-99
Submitted by StorageTek
ELECTRONICALLY STORED DATA AND ELECTRONIC RECORDS
-- Richard Bland, Counsel to StorageTek
Technological advances now permit the electronic storage of information, data, and other records in conjunction with, or in replacement of, traditional paper filing and recording systems. Such technological advances include development of high capacity magnetic storage devices. The electronic storage of such information, data, and other records provides many significant benefits, such as: (1) the centralized management of the information; (2) computerized searching and retrieval of the information, often over vast geographic distances; (3) increased access to stored information, again often over vast geographic distances; (4) improved security and audit procedures for limiting or controlling access to the information; and (5) reduced space requirements for storage of the information, particularly if the paper originals are destroyed after the information is electronically recorded and stored. These benefits provide efficiencies and cost savings not available with storage of paper originals.
Quite often, electronic storage of information, data, and other records facilitates destruction of the paper originals. While there are no restrictions as to how an organization might implement an electronic records system to operate in conjunction with storage of original records, there are legal considerations regarding the destruction and electronic preservation of original records and documents. While a law and regulation requiring maintenance of records will often state what technical functionality must exist before records stored electronically will satisfy the law or regulation, they generally do not specify the type of electronic storage technology. Only rarely do laws or regulations require retention of paper originals or specify the retention of records in specific electronic formats.
This white paper addresses the use of electronically stored data and electronic records during litigation and for establishing compliance with governmental regulations. This paper illustrates and concludes that organizations may implement an electronic records system using magnetic storage technology without significant legal consequences, even if the original paper records are destroyed after being electronically stored in the electronic records system.
Use of Electronically Stored Data and Electronic Records during Litigation
Among the issues central to any litigation matter or trial are: (1) the extent of a party’s ability to obtain evidence from other parties during the discovery process (the “discoverability” of evidence); and (2) the admissibility of evidence at trial. The following two sections discuss the discoverability and admissibility of electronic records during litigation or trial.
Discoverability of Electronic Records and Data
Discoverability of evidence refers to the ability of one party to obtain particular evidence from other parties in litigation. Pursuant to the Federal Rules of Civil Procedure (FRCP) applicable in all United States Federal Courts, data compilations, including electronically stored data, are discoverable in litigation provided that such data is relevant to the subject matter of the action and not protected by the attorney-client privilege, attorney work product doctrine or other applicable privilege2.
Electronically stored data may be protected from discovery by applicable privileges. As is the case with tangible documents, electronically stored data which records or constitutes confidential communications between attorney and client are not discoverable provided the confidentiality of such communications is adequately established and maintained3. Likewise, electronically stored data is also subject to the protections of the attorney work product doctrine according to the same conditions and restrictions as other documentary evidence4. Accordingly, although electronically stored data is subject to discovery, it is also subject to the same privileges and protections as documentary evidence.
Admissibility of Electronic Records and Data
Electronically stored data is also admissible in evidence at trial under the same conditions as other evidence. Pursuant to the Federal Rules of Evidence applicable in all United States Federal Courts, electronically stored data are defined to be “writings” and “recordings” just as documents containing handwritten, typewritten or printed information5. Writings and recordings are admissible in evidence if they bear on the existence of a fact at issue in the action and are therefore relevant6. Likewise, writings and recordings are admissible in evidence only if they have been first properly authenticated - that is, proved to be what they purport to be7. With respect to electronically stored data, Federal Rule of Evidence 901(b)(9) provides that such evidence is properly authenticated if it is described by one with knowledge and shown to be accurate or to produce an accurate result8. Thus, accuracy and reliability of the electronic records are the foremost considerations of a court when ruling on the admissibility of the electronic records during trial, not the specific technology used to store the electronic records.
Provided electronically stored data is otherwise relevant and properly authenticated, it is admissible under the same conditions and limitations as other evidence. For instance, one hurdle to the admissibility of evidence is the rule that prohibits the admission of hearsay evidence9. As with other evidence, electronically stored data may be admissible as exceptions to the hearsay rule10. One particularly important exception to the rule prohibiting the admission of hearsay is the rule permitting the admission of records of a regularly conducted business activity.
More specifically, Rule 803(6) of the Federal Rules of Evidence provides that business records are admissible during trial as follows:
A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnoses, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the memorandum, report, record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness11.Therefore, electronically recorded or stored data kept in the ordinary course of a regularly conducted business are admissible as exceptions to the hearsay rule on the same terms as documentary evidence 12.
In certain instances, the Federal Rules of Evidence require admission of original writings and recordings to prove their content13. However, the Rules also provide that: “If data are stored in a computer or similar device, any printout or other output readable by sight, shown to reflect the data accurately, is an “original.”14 Likewise, “duplicate” is defined in the Rules to include “a counterpart produced...by...electronic re-recording...which accurately reproduces the original.”15 Duplicates of “writings” and “recordings” are admissible to the same extent as the originals16 and such duplicates can be admitted even if the originals are lost17. Thus, electronic recordings, whether originals or duplicates, are admissible in evidence under the same conditions as documentary evidence.
Similarly, the Uniform Photographic Records Act (UPRA), also known as the Uniform Photographic Copies of Business and Public Records as Evidence Act, adopted in 18 states18 and by the federal government 19, also provides that mass electronic reproductions and storage of data generated in the regular course of business in durable, accurate, electronic form are admissible in judicial and administrative proceedings to the same extent as the original data would be and that the originals from which such data was complied may be destroyed. Section 1 of the Uniform Preservation of Private Business Records Act (UPPBRA), currently effective in Illinois, Maryland, New Hampshire and Oklahoma, similarly defines “Reproduction” to include processes which accurately and durably reproduce original data20. This definition likely includes electronically stored data. Section 3 of the UPPBRA provides that retention and preservation of “Reproductions” of business records constitutes compliance with all state laws requiring preservation of such business records.
Thus, as discussed above, the use of electronically stored data and records in litigation pose no unique problems or hurdles beyond those which exist with other forms of evidence. Courts, and the law making bodies establishing court procedures, have realized and accepted the realities of electronically stored data and electronic record keeping and have, as a result, established and interpreted the rules of evidence and civil procedure to allow their use during litigation. The courts and the law making bodies are expected to continue their acceptance of new technologies applicable to the electronic storage of information, data, and records.
Federal Regulatory Acceptance of Electronically Stored Data and Electronic Records
The legal requirements for record keeping imposed by state or federal government and regulatory agencies can be quite extensive. For example, the Securities and Exchange Commission (SEC) has established significant record keeping responsibilities for securities dealers and brokers. While some federal government agencies have established rules for electronic storage of information, data, and records, most federal government agencies do not require specific electronic record formats and may not even address the form for records at all. The following sections discuss federal government agencies, such as the SEC, that have instituted some form of electronic record keeping guidelines or requirements.
The General Federal Standard for Electronic Storage
In substantially similar form to the Uniform Photographic Records Act (UPRA) discussed above, Congress has passed a statute which provides the following:
If any business, institution, member of a profession or calling, or any department or agency of government, in the regular course of business or activity has kept or recorded any memorandum, writing, entry, print, representation or combination thereof, of any act, transaction, occurrence, or event, and in the regular course of business has caused any or all of the same to be recorded, copied, or reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic, or other process which accurately reproduces or forms a durable medium for so reproducing the original, the original may be destroyed in the regular course of business unless its preservation is required by law. Such reproduction, when satisfactorily identified, is as admissible in evidence as the original itself in any judicial or administrative proceeding....21Unless originals are required to be kept under another federal or state law, the UPRA explicitly provides that reproductions may be retained through any electronic storage media which “accurately reproduces” or provides a “durable medium” for its storage. Since the UPRA is a congressionally enacted statute, except for agency regulations requiring the maintenance of original documentation, the UPRA will control over any conflict with established federal agency regulations. The UPRA does not make mention of specific technology, but only sets forth general guidelines which an individual or entity user may satisfy with the method best suited to its needs.
In addition to the UPRA, the Federal Paperwork Reduction Act (FPRA)22 provides that “the paperwork burden for individuals, small businesses...resulting from the collection of information by or for the Federal Government” is to be minimized23 and that “information collection burdens on the public” are to be reduced24. Therefore, federal regulatory agencies are also limited by the (FPRA) as to the amount and type of record keeping obligations that can be imposed.
Electronic Storage and the Securities and Exchange Commission
Section 17(a)(1) of the Securities Exchange Act of 1934 (the “Act”) mandates that:
every national securities exchange, national securities association, registered clearing agency and the Municipal Securities Rule Making Board shall keep and preserve at least one copy of all documents, including all correspondence, memorandum, papers, books, notices, accounts, and other such records received by it in the course of its self-regulatory activity of a period of not less than five years, the first two (2) years of which such documents must be preserved in a easily accessible place.25In addition, Section 17(a)(3) of the Act requires that exchange members, brokers, and dealers (collectively, “Brokers”) must retain reports for and be able to furnish copies of such reports to appropriate regulatory agencies for periods of time specified by these same regulatory agencies26. The requirements of the Act and the heavy volume of trade that occurs every day at the nation’s securities exchanges, combined with the danger of fraud and document alteration, have placed a premium on the goal of efficient documentation storage and accessibility27.
In order to utilize the technology available to achieve this goal, the SEC recently promulgated rules specifically allowing Brokers to use electronic storage media for record keeping (the “Storage Rules”)28. The new rules, contained in the Code of Federal Regulations and applicable to all securities exchanges and their respective Brokers, are tailored to “maintain enforcement of securities laws to prevent forgery, erasure, data manipulation, and other fraud.”29
While the SEC’s Storage Rules require that certain original documentation be maintained for a specified period of time, such as “communications received and copies of all communications sent” by a Broker relating to his business,30 all other documents are subject to the UPRA. Thus, despite the fact that the SEC’s Storage Rules prescribe minimum standards for “electronic storage media,”31 to the extent the standards are not directed to the maintenance of original records, the UPRA controls. In addition, by defining electronic storage media through general standards as opposed to specific technology, the SEC allows the individual user to determine the most cost effective approach to electronic storage.32
Electronic Storage and the Commodity Futures Trading Commission
Just as in the case of the SEC, the Commodities Futures Trading Commission (the “CFTC”) requires certain records and documentation to be retained for a specified period of time. Specifically, the CFTC requires only two types of documentation to be retained in original form: trading cards and written customer orders.33 All other records and documents that must be retained are not required to be retained in original form. As such, the standards provided in the UPRA control. Such documentation may be saved on electronic storage media felt to be most appropriate by the individual user.
Electronic Storage and Municipal Securities Rule Making Board
Similar to the SEC and the CFTC discussed above, the Municipal Securities Rule Making Board (the “Municipal Board”) requires various records of transactions and securities to be retained from three to six years.34
The Municipal Board requires a method of retention according to the following specifications:
Whenever a record is required to be preserved...such record may be retained either as an original or as a copy or other reproduction thereof, or on microfilm, electronic or magnetic tape, or by the other similar medium of record retention, provided that such municipal securities broker or municipal securities dealer shall have available adequate facilities for ready retrieval and inspection of any such record and for production of easily readable facsimile copies thereof and, in the case of records retained on microfilm, electronic or magnetic tape, or other similar medium of record retention, duplicates of such records shall be stored separately from each other for the periods of time required by this rule.35It is clear from the Rule that magnetic tape is explicitly allowed.
Electronic Storage and the Food and Drug Administration
The Food and Drug Administration (FDA) allows wide latitude to individual users to determine an acceptable electronic storage media. For example, the FDA requires that laboratory results must be retained through methods according to the following guidelines:
Records required...may be retained either as original records or as true copies such as photocopies, microfilm, microfiche, or other accurate reproductions of the original records.36Therefore, the FDA does not mandate any specific type of electronic storage medium.
Electronic Storage and the Department of Treasury
Like the FDA, the Department of the Treasury (the “Treasury”) also allows wide latitude to individual users to determine an acceptable electronic storage media. To regulate casinos, for example, the Treasury requires that information meet the following standards:
Casinos which input, store, or retain, in whole or in part, for any period of time, any record required to be maintained...on computer disk, tape, or other machine-readable media shall retain the same on computer disk, tape, or machine-readable media.37Like the FDA, therefore, the Treasury only sets standards for record retention as opposed to specifying a specific technology.
Electronic Storage and the Internal Revenue Service
While the Internal Revenue Service (IRS) requires taxpayers to maintain records to support their tax returns, it allows taxpayers to maintain different record systems and to maintain their records in different formats. The IRS does provide guidelines, however, regarding record keeping for different storage formats. For example, Revenue Procedure 81-46 establishes requirements for microfilm systems and Revenue Procedure 91-59 establishes requirements for computer systems, including pure electronic record keeping systems such as electronic data interchange (EDI). In fact, Revenue Procedure 91-59 contemplates that, in certain cases, the IRS may require the use of “machine-sensible records.”
In 1997, the IRS published Revenue Procedure 97-2238, which establishes requirements for electronic storage of tax books and records. Under Revenue Procedure 97-22, taxpayers are authorized to use electronic imaging technology for accounting and tax records, provided that the system includes controls to ensure accuracy, reliability, regular system checks, and adequate retrieval and reproduction capabilities. Any technology can be used for electronic storage as long as these requirements are satisfied.
Electronic Storage and Federal Acquisition Regulations
In order to ensure compliance with applicable federal regulations, contractors engaged in government projects must maintain records and documents necessary to “satisfy contract negotiation, administration, and audit requirements” according to the Federal Acquisition Regulations System39. When such information is maintained on a computer system, the requirements for the electronic storage media are as follows:
contractors shall retain the computer data on a reliable medium for the time periods prescribed. Contractors may transfer computer data in machine readable form from one reliable computer medium to another. Contractors’ computer data retention and transfer procedures shall maintain the integrity, reliability, and security of the original computer data. Contractors shall also retain an audit trail describing the data transfer.40Just as in the case of the SEC and CFTC regulations described above, these guidelines do not specify a specific electronic storage technology, but allow the individual user or entity to determine the most appropriate technology.
The efficiencies and acceptance
of electronically stored data, information, and records, as outlined above,
clearly provide a substantial legal and business basis for the use of magnetic
storage devices. The current and widespread legal acceptance of electronic
storage devices foretells the continued acceptance of advances in current
electronic storage technologies and the future development of entirely
new electronic storage technologies.
-- WORM tape ensures that the media is ‘non-erasable and non-rewritable’ using a combination of safeguards. Enhanced microcode is loaded into the tape control units to enable the tape drives to recognize WORM tape cartridges and prevent data from being erased or changed. Unique WORM tape cartridges have special physical indicators, such as notches or holes, that the drive can sense. And factory initialized media has flags pre-set at the factory indicating that it is WORM media. -- Fed. R. Civ. P. 26(a)(1)(B), 26(b)(1), 34(a), 45(a)(1)(C); In re: Brand Name Prescription Drugs Antitrust Litigation, 1995 U.S. Dist. LEXIS 8281 (N.D.Ill. 1995) (“Rules 26(b) and 34...instruct that computer-stored information is discoverable under the same rules that pertain to tangible, written materials.”); Leibowitz, Is All Fair in Love and Litigation? Electronic Records Rules Emerge, (The National Law Journal, April 14, 1997). Rule 26(b)(1) of the FRCP provides: “Parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action....” Rule 34(a) of the FRCP, which permits one party to inspect and copy tangible items from other parties, provides: “Any party may serve on any other party a request (1) to produce and permit the party making the request... to inspect and copy, any designated documents (including writings...and other data compilations from which information can be obtained...by the respondent through detection devices into reasonably usable form)....” -- See Pechette, The Best Plan Assumes Electronic-Based Evidence is Discoverable (New York Law Journal, August 9, 1994). The Attorney-Client Privilege and the Work Product Doctrine, p. 125, Section of Litigation, American Bar Association (3d ed. 1997). -- Fed. R. Civ. P. 26(b)(3) and (5); The Attorney-Client Privilege and the Work-Product Doctrine, p. 306-08, Section of Litigation, American Bar Association (3d ed. 1997); see also United States v. American Tel. & Tel. Co., 642 F.2d 1285 (D.C. Cir. 1980). -- Fed. R. Evid. 1001(1). Rule 1001(1) provides: “‘Writings’ and ‘recordings’ consist of letters, words, or numbers, or their equivalent, set down by handwriting, typewriting, printing... magnetic impulse, mechanical or electronic recording, or other form of data compilation.” -- Fed. R. Evid. 402. Rule 402 provides that, except for certain exceptions, “all relevant evidence is admissible” and any “evidence which is not relevant is not admissible.” -- Fed. R. Evid. 901(a). Rule 901(a) provides: “The requirement of authentication as a condition precedent to admissibility is satisfied by evidence sufficient to support a finding that the matter in question is what its proponent claims.” -- See also United States v. Miller, 771 F.2d 1219, 1237 (9th Cir. 1985) (computer records authenticated by one with custody and knowledge of computer-generated records). -- Fed. R. Evid. 801, 802. -- See Fed. R. Evid. 803(5) - (10), (16) - (18). -- Fed. R. Evid. 803(6). -- See Kennedy v. Los Angeles Police Department, 901 F.2d 702 (9th Cir. 1989); United States v. Miller, 771 F.2d 1219 (9th Cir. 1985). -- Fed. R. Evid. 1002. Rule 1002 provides: “To prove the content of a writing, recording, or photograph, the original...is required, except as otherwise provided in these Rules or by Act of Congress.” (emphasis added). -- Fed. R. Evid. 1001(3). Rule 1001(3) provides, in part: “If data are stored in a computer or similar device, any printout or other output readable by sight, shown to reflect the data accurately, is an ‘Original’.” -- Fed. R. Evid. 1001(4). -- Fed. R. Evid. 1003. Rule 1003 provides: “A duplicate is admissible to the same extent as an original unless (1) a genuine question is raised as to the authenticity of the original or (2) in the circumstances it would be unfair to admit the duplicate in lieu of the original.” See also United States v. Foley, 598 F.2d 1323 (4th Cir. 1979). -- Fed. R. Evid. 1004(1). -- States adopting the Uniform Photographic Records Act include Arkansas, California, Colorado, Georgia, Kansas, Kentucky, Maryland, Minnesota, Nebraska, New Jersey, North Carolina, North Dakota, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont, Washington and the Virgin Islands -- 28 U.S.C. § 1732 (1975). See infra, footnote 20 and accompanying text. -- For example, as defined in the UPPBRA adopted in Illinois, “‘Reproduction’ means a reproduction or durable medium for making a reproduction obtained by any photographic, optical imaging, photostatic, microfilm, microcard, miniature photographic or other process which accurately reproduces or forms a durable medium for so reproducing the original.”. -- 28 U.S.C. § 1732 (emphasis added). -- 44 U.S.C. § 3501 (1997). -- 44 U.S.C. § 3501(1). -- 44 U.S.C. § 3501(10). -- 15 U.S.C. § 78(a)(1). -- 15 U.S.C. § 78(a)(3). -- See Sahl and Musyl, New Rules for Electronic Storage of Records by Broker-Dealers, The Colorado Lawyer, May 1997, at p. 97 [hereinafter SAHL AND MUSYL, NEW RULES]. -- 17 C.F.R. § 240.17a-4(f) (“The records required to be maintained...may be immediately produced or reproduced...by means of ‘electronic storage media’....”) -- SAHL AND MUSYL, NEW RULES, at p. 97. -- 17 C.F.R. § 240.17a-4(b)(4). -- 17 C.F.R. § 240.171-4(f)(2)(ii)(A)-(D). Specifically, the SEC’s Storage Rules require that the electronic storage media must be able to:
I. Preserve the records exclusively in a non-rewriteable, non-erasable format;-- See generally, In re: Brand Name Prescription Drugs Antitrust Litigation, 1995 U.S. Dist. LEXIS 8281 (N.D. Ill.). -- 17 C.F.R. § 1.31(b)(2). -- Municipal Securities Rule Making Board, Rule G-9(a) and 9(b). -- Municipal Securities Rule Making Board, Rule G-9(e) (emphasis added). -- 21 C.F.R. § 58.195(g) (emphasis added). -- 31 C.F.R. § 103.36(c)(1) (emphasis added). -- The text of this Revenue Procedure is published in Internal Revenue Bulletin No. 1997-13 (March 31, 1997) at page 9. -- 48 C.F.R. § 4.703(a). -- Id. at § 4.703(d) (emphasis added).
II. Verify automatically the quality and accuracy of the storage media recording process;
III. Serialize the original and, if applicable, duplicate units of storage media, and time-date for the required period of retention the information placed on such electronic storage media; and
IV. Have the capacity to readily download indexes and records preserved on the electronic storage media to any medium acceptable under this paragraph...as required by the Commission or the self-regulatory organizations of which the member, broker or dealer is a member.