Quick Answer
A covered nonresident broker-dealer may maintain current, complete copies of required records within the United States and notify the SEC of that address, or file the prescribed written undertaking to produce records at its expense within 14 days after an SEC written demand forwarded by registered mail.
The rule gives the SEC reliable access to records despite the firm's foreign location. Its two compliance routes are alternatives. Overseas storage can comply through the undertaking route; informal promises to cooperate or electronic access alone do not satisfy that route.
Who Is Covered
The rule applies to a nonresident broker-dealer that is:
- Registered with the SEC as a broker-dealer, OR
- Applying for registration as a broker-dealer
The definition depends on legal form. An individual is nonresident if their residence or principal place of business is outside U.S. jurisdiction. A corporation is nonresident if incorporated or principally based outside U.S. jurisdiction. A partnership or other unincorporated organization is nonresident if its principal place of business is outside U.S. jurisdiction.
Record location alone does not establish residency. The rule contains a limited exception for certain notice-registered security-futures firms that belong to neither a national securities exchange nor a registered national securities association.
Exam Tip: Gotchas
- A corporation incorporated and headquartered in the United States does not become nonresident merely by opening a London branch or storing branch records abroad. Other SEC recordkeeping and access duties still apply.
The U.S.-Based Copies Requirement
Under the domestic-copy route, the nonresident must:
- Keep, maintain, and preserve at a place within the United States
- True, correct, complete, and current copies of all books and records the firm is required to make under any SEC rule
- Furnish written notice to the SEC specifying the address within the U.S. where the records are located
The U.S. copies must cover the firm's SEC-required records. They cannot be a partial set or a summary. A new applicant files the address notice with its registration application.
| Requirement | Detail |
|---|---|
| Where | At a place within the United States |
| What | True, correct, complete, and current copies of all SEC-required records |
| Notice | Written notice to the SEC of the U.S. address |
| Status | Records must be current, not stale duplicates |
Exam Tip: Gotchas
- The U.S. records must be CURRENT, not stale duplicates. A nonresident that maintains a U.S. copy that lags the foreign master by months is not compliant. The U.S. copies must mirror the firm's current books and records.
The 14-Day Production Window
Instead of maintaining U.S. copies, the firm may file a written undertaking, signed by an authorized person and acceptable to the SEC, to furnish true, correct, complete, and current copies on demand. A new applicant files this undertaking with its registration application. Under this route:
- Production is at the firm's expense
- Production must occur within 14 days after written demand forwarded by registered mail
- Records may be requested at the SEC's principal office in Washington, D.C. or at any Regional Office designated in the demand
The demand is forwarded by registered mail to the firm's last address of record filed with the SEC. The undertaking requires delivery at the SEC office specified in the demand, even when the records are stored abroad.
The undertaking is suspended while the firm fully complies by maintaining the prescribed domestic copies. Changing routes does not eliminate the underlying duties to make and preserve records.
Exam Tip: Gotchas
- The 14-day clock runs from written demand forwarded by registered mail, NOT from the date the firm sees the demand. A firm that ignores incoming SEC mail has no 14-day extension; the clock started when the SEC sent the demand.
Why the Rule Exists
Foreign storage can complicate regulatory access. The rule addresses that problem through either domestic copies or an enforceable production undertaking:
- Domestic copies make current records available at a disclosed U.S. location.
- The undertaking sets a production deadline and permits delivery to a designated SEC office.
- The firm bears the costs of producing records under its undertaking.
Covered nonresident firms must establish a compliant route when applying for registration and maintain compliance afterward.
What Should You Check on Exam Day?
- Can you distinguish a nonresident broker-dealer from a U.S. firm with a foreign branch, and state which one the rule targets?
- Can you distinguish the domestic-copy route from the alternative production undertaking?
- Do you know that the U.S.-based copies must be current, not stale duplicates that lag the foreign master records?
- Can you state the deadline for producing records after a written SEC demand, and where the SEC may request them?
- Do you know that the 14-day clock runs from the SEC's mailed demand, not from the date the firm actually sees it?