Recordkeeping requirements

Broker-dealers are required to keep certain books and records on file. If a problem comes up during a customer interaction or in the firm’s business operations, those records help show what happened and when it happened.

Retention periods range from 3 years to the lifetime of the firm, depending on the type of record. These are the requirements to know for the exam.

3 years

These records typically relate to customer communications and employee records. The documents that must be kept on file for at least 3 years include the following:

• Employee records
  • Form U-4
  • Form U-5
  • Fingerprint records
• Trade confirmations
• Statements
• Public communications
  • Correspondence
  • Retail communications
  • Institutional communications
• Trial balances*

*Trial balances list all credits and debits (money in and money out) related to the broker-dealer’s business. Here’s an example. You don’t need to know the details for the exam - just that trial balances have a 3-year retention requirement.

4 years

There’s only one item with a 4-year retention requirement: customer complaints.

Complaints can be tricky because the retention period depends on which regulator the question is asking about:

• FINRA (or general): 4 years
• MSRB: 6 years

Here are examples of how this shows up on the exam:

According to FINRA rules, how long must broker-dealers maintain complaints on file?

Answer: 4 years

You may also see:

According to MSRB rules, how long must broker-dealers maintain complaints on file?

Answer: 6 years

The key point is that the two regulators use different time frames, and it’s testable.

5 years

A few documents require a 5-year retention period, and they all relate in some way to anti-money laundering (AML):

• Currency transaction reports (CTRs)*
• Suspicious activity reports (SARs)*
• Customer identification program (CIP) information

*You’re unlikely to see detailed questions on CTRs or SARs here, but you may recognize them from SIE prep. CTRs are filed when a person completes a cash transaction exceeding $10,000. SARs are filed when a customer’s activity appears suspicious and may involve illegal activity (e.g., money laundering).

6 years

Most documents have a 6-year retention period, and they generally relate to customer or trade records:

• Customer account records
  • New account forms
  • Customer agreements
  • Trading authorization forms
• Customer complaints (MSRB)
• Blotters*

*Blotters are internal trading records that track the securities the broker-dealer bought and sold on a given day. You don’t need the details for the exam - just that blotters have a 6-year retention requirement.

Lifetime

Some documents must be kept for the lifetime of the firm. These records relate to the firm’s structure and ongoing operations.

• Stock certificates
• Partnership agreements
• Articles of incorporation
• Meeting minutes

A common memory aid is the acronym SPAM. (Like Spam, the meat - people joke that it lasts forever.)

Summary

Here’s a chart summarizing the information above:

Regardless of the retention periods listed above, each record must be readily available if it was created within the previous 2 years. If FINRA requests recently created documents, it expects the broker-dealer to produce them quickly.