Record retention requirements

Broker-dealers are required to keep certain books and records on file. If there’s a problem during a customer interaction or a broader business issue, those records help show what happened and when it happened.

Retention periods 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 broker-dealer’s debits and credits (money out and money in). Here’s an example. For exam purposes, the key point is that trial balances must be retained for 3 years.

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:

• FINRA (or general questions): 4 years
• MSRB-related questions: 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 timeframes differ by regulator, 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

6 years

Most documents with a 6-year retention period relate to customer or trade records:

• Customer account records
  • New account forms
  • Customer agreements, (like the margin agreement)
  • 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. For exam purposes, the key point is that blotters must be retained for 6 years.

Lifetime

Some documents must be kept for the lifetime of the firm. These records relate to the firm’s structure and ongoing operations.

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

Many people use the acronym SPAM to remember these. (Think of Spam, the meat - often joked about as lasting 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, they expect the broker-dealer to produce them quickly.