In fiscal year 2024, the SEC filed 583 enforcement actions. The financial remedy was $8.2 billion, the highest in the SEC’s history.

The number shows the SEC’s efforts to enforce federal securities laws and promote compliance. The SEC is tightening enforcement of its regulations. It is also modernizing its recordkeeping and filing rules.

In the last six months, the SEC made two major updates to its file submission rules. This is due to a digital-first culture in organizations.

In July 2024, the SEC’s Division of Enforcement (ENF) updated the technical requirements of paper & electronic document productions. (source: SEC)

In December 2024, the SEC adopted an amendment to require electronic filing or submissions of certain forms electronically using the commission’s EDGAR system. (source: SEC)

To align with the SEC’s push for modern filings, organizations should check their ability to produce requested documents within a deadline.

Today, I will cover the details of the July announcement on electronic document production requirements.

Notable Points about the SEC’s requirements for electronic document production

  • Produce electronic files in their native format. (i.e., an MS Excel file must be in MS Excel format, not an image of a spreadsheet.) An Adobe PDF file qualifies as a native file only if the document was created as a PDF from the outset.
  • Use of de-duplication methods or technology-assisted review (TAR) in document processing must be discussed and approved by ENF’s legal and technical staff, in advance.
  • When you de-duplicate electronic documents, preserve and include unique metadata in the SEC production set.
  • Cover Letter: A cover letter is mandatory for each production. It must include the info below.
    • Case number, case name, and requesting SEC staff member’s name
    • A list of each media piece in the production, with its unique production volume number.
    • A list of custodians with the Bates range for each custodian.
    • A list of redacted documents with a redaction reason.
    • The time zone in which emails were standardized during conversion.
    • Whether the production contains native files from macOS.
  • Custodians must organize all submissions; otherwise, they will be instructed.
  • All document family groups should be produced together. Children files should follow parent files in the Bates numbering (i.e., email and its attachment).
  • Special characters are not permitted in files or folder names. Only alphanumeric characters and underscores are allowed.
  • Audio files should be separated from the data file if both are included in the production.
  • Electronic files produced on media must be produced using industry-standard self-extracting encryption software.
  • Passwords for electronic documents, compressed archives, and encrypted media must be provided separately via email or in a cover letter.
  • The SEC can’t accept productions made using file-sharing sites such as Google Drive or Microsoft Office 365. Productions up to 30 GB need to be submitted via Secure File Transfer (SFTP).
  • The producing party should contact a requesting SEC staff member prior to the production of forensically collected images and unique data sets, such as chatroom data and large relational data sets. They should discuss the appropriate format and handling methods for the data.
  • All the productions should be free of computer viruses.
  • Images – Black and white images must be 300 DPI Group IV single-page TIFF files, and color images must be in JPEG format. Label the images with sequential Bates numbers in the lower right corner of each image. Per folder, the image file limit is 2000.
  • Audio Files – telephone recording systems’ audio files must be produced in a format compatible with Microsoft Windows Media Player. You must provide a metadata file for the audio files in delimited text format.

This is an overview of the technical requirements for document production. I recommend referring to the official document published by the SEC.

Now, being a general counsel, head of legal, or CLO of a public company, or a law firm partner representing a client in a civil action, second request (A second request is a formal demand by the FTC or DOJ for additional information about the proposed transaction.), or SEC administrative proceeding, might require teams with existing discovery tools to add more manual QC steps to their production process.

When looking for a new eDiscovery solution, teams should consider whether it will allow them to handle these requirements while avoiding substantial manual modifications to the production output.

Try to get the answers to some questions.

  • Can the eDiscovery software handle the entire workflow, from ESI processing to document production? Sometimes, teams deploy three to five different tools to execute eDiscovery requests.
  • How satisfied are you with the eDiscovery vendor and its technical support? Is the vendor open to changes to meet the SEC’s expectations?
  • Does existing eDiscovery software support native redaction? Are you able to produce a redaction report as per the SEC’s requirements? Does it have a feature to auto-redact information in a large dataset?
  • How compatible is your eDiscovery platform with supporting modern data types (chat data, audio files, videos, etc.)?
  • Audio/Video files must be compatible with MS Windows Media Player. They must also include a transcript. Can the system generate transcriptions? If it supports audio/video redactions, will the output meet the requirements?
  • Can the system allow you to specify the output folder names and structure?
  • Can the system limit the number of images per subfolder in the delivery? Can the system allow you to change your image compression format or set a standard DPI (dots per inch) for all B&W images?
  • How supportive is the eDiscovery platform when it comes to analyzing financial data?
  • Are you happy with the eDiscovery platform’s data processing speed and accuracy?
  • Last but not least, how cost-effective is your eDiscovery platform? Is its subscription and hosting exhausting your budget?

These questions will help you assess your eDiscovery setup. They may also start your search for alternatives.

Final thoughts from your friends at Knovos…

As touched upon above, these changes raise a couple of other interesting broader points, such as operational changes to the way organizations store data and how they train staff to deal with it. The SEC changes like this could also help make a strong case for technology investments within organizations to gain power over your data; this, in turn, interacts with future budgets for companies with large volumes of ESI.

Speaking of budgets, this could trigger discussions about the size of your organization’s legal war chest and potentially expensive compliance risks. Looking ahead, these updates have opened the door to more regulatory amendments in the future! Organizations need to become comfortable with change and can start by getting prepared now.

Conclusion

All organizations now adopt a digital-first approach. This has caused a surge in the data they generate. Additionally, new-age productivity and communication tools contribute to various data types. Legacy eDiscovery software and a fragmented setup can’t meet these challenges. For eDiscovery pros, the best fix for 2025 could be: “move from legacy eDiscovery tools to a modern eDiscovery platform.”

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