Recordkeeping Requirements

The final piece of the disclosure framework is recordkeeping. The exam tests both the federal record categories and how much authority a state has over a broker-dealer's books and records.

What Records Must a Broker-Dealer Make?

Under the federal recordkeeping standard, broker-dealers must create and maintain:

• Trade blotters: a chronological, itemized daily record of every purchase, sale, receipt, and delivery of securities, and every cash receipt and disbursement
• Ledgers reflecting the firm's finances and customer account activity
• Customer account records: name, address, tax ID, employment, investment objectives, and authorized persons
• Securities records: each security held, its location, and its ownership
• Order tickets: a memorandum of each order, including time of receipt, execution, and terms
• Written customer complaints and the firm's response

How Long Must a Broker-Dealer Preserve Its Records?

Federal law sets the retention period for each record type, and a broker-dealer must preserve its records for those federally prescribed periods. For Series 63, the testable point is the general duty to make and preserve records and the limit on state authority over them, not the individual federal retention schedule or the electronic storage format.

How Long Must an Investment Adviser Keep Its Records?

Advisers follow a different rule from broker-dealers. NASAA has issued a model rule for investment adviser books and records, and its retention period is not the broker-dealer schedule above:

• Keep required records for five years from the end of the fiscal year in which the last entry was made on the record
• Keep the first two years of that period in the adviser's principal office
• Record each personal securities transaction of an advisory representative no later than 10 days after the end of the calendar quarter in which the transaction happened

Exam Tip: Gotchas

Two traps live here. First, the adviser's five years run from the end of the fiscal year, not from the date of the last entry. Second, the five-year period belongs to advisers; a broker-dealer blotter still uses six years. A question that pairs "five years" with "date of the last entry" is wrong on the starting point even though the number is right.

How Far Can a State's Recordkeeping Authority Reach?

• The North American Securities Administrators Association (NASAA) has not issued a model rule on broker-dealer books and records
• Federal law limits state regulatory authority over broker-dealer recordkeeping
• A state may require records consistent with the federal standards, but it cannot impose recordkeeping requirements that exceed them
• The state Administrator may examine a broker-dealer's books and records, and may also prescribe records by rule or order. For broker-dealers, that power is capped by federal law

Exam Tip: Gotchas

Federal law limits the Administrator's recordkeeping power over broker-dealers; it does not eliminate it. A state cannot require a broker-dealer to make or keep records beyond what the federal standards already require, so the practical Series 63 answer is that the federal rules set the content of a broker-dealer's records.

What Should You Check on Exam Day?

• Broker-dealers make and preserve the records federal law requires; Series 63 does not test the individual federal retention periods or storage formats.
• Check whose records the question asks about. An investment adviser uses 5 years from fiscal year-end, with the first 2 years in the principal office.
• Confirm state authority over broker-dealer records: consistent with federal standards, never beyond them, and there is no NASAA model rule filling the gap.