Record retention

Member firms must keep certain books and records on file. If there’s a problem during a customer interaction or a broader business issue, good documentation helps show what happened and when it happened.

Record retention time frames range from 3 years to the firm’s lifetime, depending on the type of record. Here 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 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 list the credits and debits (money in and money out) related to the broker-dealer’s business. Here’s an example of one. For exam purposes, the key point is that trial balances have a three-year retention requirement.

4 years

There’s only one record 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 track the securities the broker-dealer bought and sold on a 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 use the acronym “SPAM” to remember these. Think of Spam, the meat - some say Spam lasts forever.

Summary

Here’s a chart summarizing the information above:

Regardless of the retention periods above, each record must be “readily available” if it was created within the previous two years. In other words, if FINRA requests recently created documents, the regulator expects broker-dealers to produce them quickly.