hardMultiple ChoiceObjective-mapped
CISSP Practice Question: A financial institution is required to retain…
A financial institution is required to retain customer transaction records for seven years under regulatory mandates. The institution is facing a lawsuit and must preserve all relevant data. What legal concept applies?
⚠ Common exam trap
Test-takers frequently confuse the operational concept of a data retention policy (Option B) with the legal obligation of a legal hold, failing to recognize that a lawsuit triggers a superseding duty to preserve that overrides any scheduled destruction.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Legal hold
When a lawsuit is reasonably anticipated or has been filed, the duty to preserve relevant evidence arises. A legal hold (also known as a litigation hold) is the formal process that suspends normal data retention and destruction policies to ensure that all potentially relevant electronically stored information (ESI) is preserved. This overrides the standard seven-year retention schedule because the legal obligation to preserve supersedes the regulatory retention mandate.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
E-discovery
Why it's wrong here
E-discovery, or electronic discovery, is the process of identifying, preserving, collecting, processing, reviewing, and producing electronically stored information (ESI) in response to a legal request or investigation. While it relies on data being preserved, e-discovery itself is the subsequent procedural phase of managing and presenting that evidence, not the initial legal directive that mandates the preservation of data. It's a post-preservation activity.
- ✗
Data retention policy
Why it's wrong here
A data retention policy establishes the routine schedules and procedures for how long specific types of data must be kept and when they can be routinely disposed of, based on business, regulatory, or compliance requirements. While essential for information governance, it is a standing operational guideline that can be overridden by an extraordinary legal mandate like a legal hold, which specifically prohibits the deletion of relevant data irrespective of its scheduled disposal date.
- ✗
Chain of custody
Why it's wrong here
Chain of custody refers to the chronological documentation or paper trail that records the sequence of custody, control, transfer, analysis, and disposition of physical or electronic evidence. Its primary purpose is to maintain the integrity and authenticity of evidence once it has been identified and collected, ensuring its admissibility in legal proceedings. It does not, however, initiate the requirement to preserve data in the first place, but rather tracks it once preservation and collection are underway.
- ✓
Legal hold
Why this is correct
A legal hold, also known as a litigation hold or preservation order, is a formal directive issued by an organization to suspend the normal disposition or alteration of records and information that may be relevant to a pending or reasonably anticipated legal action, investigation, or audit. This critical process ensures that all potentially discoverable data, including electronically stored information (ESI), is preserved, overriding any routine data retention policies that might otherwise lead to its deletion. It directly addresses the requirement to retain customer transaction data in anticipation of legal needs.
Go deeper
Related to this question
About these practice questions
This CISSP question is part of Courseiva's 747-question bank — original exam-style content with full explanations and wrong-answer analysis, never real exam questions or exam dumps. Learn why practice questions differ from exam dumps →
JA
Written by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
This CISSP practice question is part of Courseiva's free ISC2 certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the CISSP exam.