Record retention

Member firms 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 to the firm’s lifetime, depending on the record type. 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 three years include:

• Employee records
  • Form U-4
  • Form U-5
  • Fingerprint records
• Trade confirmations
• Statements
• Public communications
  • Correspondence
  • Retail communications
  • Institutional communications
• Trial balances*
• Reports related to trade errors and cancel/rebills

*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 that they have a three-year retention requirement.

4 years

There’s only one thing with a four-year retention requirement - customer complaints.

5 years

A few documents require a five-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

6 years

Most of the documents requiring a six-year retention period are related to customer or trade records:

• Customer account records
  • New account forms
  • Customer agreements, (e.g., the margin agreement)
  • Trading authorization forms
• Blotters*

*Blotters are internal trading records that keep track of the securities the broker-dealer bought and sold on any given day.

Lifetime

These documents related to a member firm’s structure or operations must be kept on file for the firm’s lifetime:

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

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

Summary

Here’s a chart summarizing the information above:

Regardless of the record retention requirements listed above, each record must be “readily available” if the document was created within the previous two years. If FINRA requests recently created documents, the regulator wants broker-dealers to produce them quickly.