ShareBuilder Securities' Example

ShareBuilder Securities, an online trading firm, tried to store and retrieve all of its trades, statements and marketing e-mail itself until the summer of 2001, when it realized that an outside service provider could more efficiently and inexpensively manage its data.

"We were doing it internally by saving all of the e-mails on CDs and then storing them offsite," says Paula Harris, ShareBuilder's records manager. "But we were spending so much time labeling and indexing all these disks that we were getting away from our core competency. I mean, we're an electronic trading firm."

After researching and evaluating software and services from a variety of vendors, ShareBuilder chose to migrate all of its e-mail and instant messaging data to Zantaz. The software immediately copies all e-mails from ShareBuilder's e-mail server and sends them to the Zantaz data center. This data center uses blade servers—thin circuit boards containing one or more microprocessors. Each blade is intended for a single application. Each blade server comes with a 100-gigabyte drive. Zantaz' indexing system organizes the data for easy retrieval.

When a ShareBuilder executive or an SEC or NASD investigator wants to access an e-mail or, perhaps, an entire year's worth of messages, he or she simply logs on to a Web browser that connects to the data center. What used to take several technology employees several days to track down through an extensive search of ShareBuilder's e-mail server now takes just a few minutes.

Had ShareBuilder tried to do this internally, it would have cost at least $250,000 in initial hardware and software, Harris says. That does not count the costs of dedicating staff to implement and maintain it. Simply constructing the document management system could have taken a year.

Instead, ShareBuilder has budgeted $36,000 this year for the software and service support and, most importantly, already complies with SEC and NASD rules. "We're ready for any type of check or investigation," Harris says. "It puts us at ease knowing we're in full compliance."

Bob Colby, a deputy director in the SEC's division of market regulation, says investigators typically stumble across record-keeping violations while pursuing other investigations. Often, he says, brokerage firms are unaware they're not in compliance with regulation 17a-4.

A routine record-keeping violation is often a very small fine, he says. "But the fines increase if we find there's a systemic problem in how a firm saves this information. It's even more severe if we find they're destroying the data."

Some brokerage firms aren't comfortable storing all their internal and external e-mail and instant messages at an external data center.

Such firms can install their own archival servers, which can cost between $3,000 and $50,000 apiece. These can be attached to servers that collect, store and exchange e-mail for Microsoft Outlook or Lotus Notes users. Messages stored this way also may be backed up on either digital tape or an optical disk drive, these firms say.