Localfile options are available in the the following installation types:
All localfile options must be configured in the /var/ossec/etc/ossec.conf or /var/ossec/etc/shared/agent.conf and used within the <ossec_config> or <agent_config> tags.
XML excerpt to show location:
<ossec_config>
<localfile>
<!--
Localfile options here
-->
</localfile>
</ossec_config>