Broker-dealers are required to keep certain books and records on file. In the event of a mishap during a customer interaction or a general business problem, it’s important to have documentation showing what occurred. Record retention time frames range from 3 years all the way to the lifetime of the firm, depending on the type of record. These are the requirements to be aware of for the exam:
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:
*Trial balances show all of the credits and debits (money in and money out) related to the broker-dealer’s business. Here’s an example of one. You don’t need to know much about them except they require a 3-year retention requirement.
There’s only one thing with a 4-year retention requirement - customer complaints. Complaints unfortunately have two retention requirement time frames depending on how the question is asked. If it’s a FINRA-based or general question, complaints require a 4-year retention period. However, if it’s an MSRB-related question, complaints require a 6-year retention period. If this sounds confusing, here are some examples of questions you’ll see on this topic:
According to FINRA rules, how long must broker-dealers maintain complaints on file?
Answer: 4 years
You can also see this:
According to MSRB rules, how long must broker-dealers maintain complaints on file?
Answer: 6 years
For whatever reason, the two regulators decided on different time frames, and unfortunately, it’s a testable topic.
A few documents require a 5-year retention period, and they all relate in some way to anti-money laundering (AML):
*We don’t expect you to encounter any specific questions on CTRs or SARs, but you may remember them if you’ve previously studied for the SIE Exam. CTRs are filed when a person performs a cash transaction exceeding $10,000. SARs are filed when a customer of a financial firm is performing suspicious activities that may be the result of illegal activity (e.g. money laundering).
Most of the documents require a 6-year retention period related to customer or trade records:
*Blotters are internal trading records that keep track of the securities the broker-dealer bought and sold on any given day. You don’t need to know much about them except they require a 6-year retention requirement.
There are some documents broker-dealers must keep on file for the lifetime of the firm. All of these documents relate to the structure of the firm or its operations.
Many people use the acronym ‘SPAM’ to help memorize these. Remember Spam, the meat? Many people say Spam lasts forever.
Here’s a chart summarizing the information above:
Timeframe | Documents |
---|---|
3 years | Employee records |
Trade confirmations | |
Customer statements | |
Public communications | |
4 years | Complaints (FINRA) |
5 years | CTRs |
SARs | |
CIP information | |
6 years | Blotters |
Customer account records | |
Complaints (MSRB) | |
Lifetime | Stock certificates |
Partnership agreements | |
Articles of incorporation | |
Meeting minutes |
Regardless of any of the record retention requirements listed above, each record must be readily available if the document was created within the previous 2 years. If FINRA requests documents that were recently created, they want broker-dealers to offer these records quickly.
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