Post-registration obligations

Initial registration of a broker-dealer (or any other person) is only the start of regulatory compliance. To keep their registration effective, broker-dealers must meet ongoing obligations. One of the first requirements listed in the Uniform Securities Act (USA) is recordkeeping:

“Every registered broker-dealer… shall make and keep such accounts, correspondence, memoranda, papers, books, and other records as the [Administrator] prescribes by rule or order”

In practice, broker-dealers must maintain a paper trail for nearly everything they do. This includes records related to:

• Customer accounts (e.g., account applications, customer information)
• Communications with the public (e.g., correspondence, memoranda)
• Internal operations (e.g., transaction logs, blotters)

These records must be kept for specified periods of time. The goal is to ensure documentation is available if a customer dispute, regulatory inquiry, or other issue arises. If jurisdiction exists, the state administrator may request and inspect these records.

Broker-dealer records are subject to a 3-year retention period, and the most recent 2 years must be kept in a readily accessible place. If the administrator requests records created within the last 2 years, the broker-dealer must produce them quickly (usually within 24 business hours). Older records can typically be produced on a longer timeline.

Acceptable record formats

State administrators require records to be maintained in specific forms. Here is the exact language from the applicable North American Securities Administrators Association (NASAA) recordkeeping rule:

"The records required to be maintained and preserved may be immediately produced or reproduced, and maintained and preserved for the required time [on]:

• Paper or hard copy form, as those records are kept in their original form; or
• Micrographic media, including microfilm, microfiche, or any similar medium
• Electronic storage media, including any digital storage medium or system that meets the terms of this section."

Today, most firms store records digitally (often in cloud-based systems). Even so, you’ll want to recognize that the rules also allow paper records and older storage methods. Historically, broker-dealers used micrographic means of recordkeeping, including microfilm and microfiche.

Indexing, access, and duplicates

The same recordkeeping rule also requires broker-dealers to organize records and make them available to the administrator. It states broker-dealers must:

"Arrange and index the records in a way that permits easy location, access, and retrieval of any particular record;

Provide promptly any of the following that the [Administrator] (by its examiners or other representatives) may request:

• A legible, true, and complete copy of the record in the medium and format in which it is stored;
• A legible, true, and complete printout of the record; and
• Means to access, view, and print the records; and

Separately store, for the time required for the preservation of the original record, a duplicate copy of the record on any medium allowed by this section."

In plain terms, the broker-dealer must be able to locate specific records quickly, give the administrator access upon request, and provide copies in usable form. The firm must also keep a separate duplicate copy for the required retention period.

Safeguarding records

NASAA’s recordkeeping rules also require the broker-dealer to establish and maintain procedures:

"To maintain and preserve the records, so as to reasonably safeguard them from loss, alteration, or destruction,

To limit access to the records to properly authorized personnel and the [Administrator] (including its examiners and other representatives),

To reasonably ensure that any reproduction of a non-electronic original record on electronic storage media is complete, true, and legible when retrieved."

In other words:

• Records must be protected from loss, alteration, or destruction.
• Access must be limited to authorized personnel and the administrator.
• Copies (especially when converting paper records to electronic form) must be complete, accurate, and readable.