Recordkeeping

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:

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:

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

*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.

4 years

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 could 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.

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

*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).

6 years

Most of the documents require a 6-year retention period related 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 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.

Lifetime

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.

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

Many people remember the acronym ‘SPAM’ to remember these. Remember Spam, the meat? Many people say Spam lasts forever.

Summary

Here’s a chart summarizing the information above:

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 for documents that were recently created, they want broker-dealers to offer these records quickly.