Quick Answer
Broker-dealers must make and preserve the records federal law requires. State authority is capped by that federal standard: the Administrator may examine a broker-dealer's books and may require records consistent with, but not exceeding, the federal rules, and there is no NASAA model rule for broker-dealer recordkeeping. Investment advisers keep records for five years.
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 different retention periods for different broker-dealer records. The Series 63 study guide permits questions on SEC and FINRA books-and-records rules, so distinguish the major periods that this section's questions test:
| Record | Preservation period |
|---|---|
| Trade blotters and general ledgers | At least 6 years |
| Order tickets, trade confirmations, and account statements | At least 3 years, first 2 easily accessible |
| Communications sent and received relating to the firm's business, including correspondence and inter-office memos | At least 3 years, first 2 easily accessible |
| Written customer complaints and responses | 4 years under FINRA's complaint rule |
| Associated-person employment and registration records | At least 3 years after termination of association |
| Partnership articles, corporate charter, and other organizational records | Life of the enterprise and any successor enterprise |
| Customer account-opening and maintenance records | Generally 6 years after account closure; some account-information records run from the earlier of closure or their update date |
The organizational-record rule has no fixed three-year tail after the firm terminates. Do not blend it with the separate three-year period for associated-person records.
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. Keep the 6-year, 3-year, 4-year, and enterprise-life categories distinct.
- 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.