Steep Cost for Failing Standards

If you don't pay up front, you may pay later. Regulated firms that fail to meet the storage and retrieval standards face fines that range between $1,000 and $100,000 per offense, as well as the possibility of censure, suspension or expulsion from the trading floor.

"The stakes are so high that brokerage firms are starting to get religion about how they manage, store and supervise their electronic documents," says Henry Carter, who formerly served as part of Merrill Lynch's compliance team and now heads up H.W. Carter Consulting. "As we've seen from the recent scandals and subsequent decline in the stock market, companies now understand that it's far better to be safe than sorry."

E-mail evidence already has played a key role in investigations of homemaking maven Martha Stewart's sale of shares she held in biopharmaceutical firm ImClone Systems, as well as a $100 million settlement reached between investment firm Merrill Lynch and the New York state attorney general's office.

In the Merrill Lynch case, analyst Henry Blodget and the firm were nailed for publicly advocating that investors purchase stock in companies that did investment banking with the firm, while simultaneously lambasting the stock in private e-mails. For example, investigators discovered that while Merrill Lynch assigned an "accumulate" rating to Excite@Home shares in June 2000—essentially telling investors to buy the stock—Blodget privately referred to the stock as a "piece of crap" in an internal e-mail.

As a technology deployer, you have to decide if you want to take on the task of building a digital document storage and retrieval system internally, or contracting it to a document software firm, such as Iron Mountain or Zantaz Inc.