Recordkeeping

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. Retention time frames range from 3 years to the lifetime of the firm, depending on the record type. 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:

• 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 the 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:

• Under FINRA rules (or in a general question), complaints must be kept for 4 years.
• Under MSRB rules, complaints must be kept for 6 years.

Here are examples of how this shows up on exams:

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

The key point is that FINRA and the MSRB use different time frames, and that difference is testable.

5 years

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

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

*You may not see detailed questions on CTRs or SARs on this exam, but they often come up in 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, especially those tied to customer accounts and trading activity:

• 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 relate to the firm’s structure and governance.

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

Many people use the acronym “SPAM” to remember these. Think of Spam, the meat - it’s often said to last forever.

Summary

Here’s a chart summarizing the information above:

Regardless of the retention periods above, any record created within the previous 2 years must be readily available. If FINRA requests recently created documents, the firm is expected to produce them quickly.