Quick Answer
SEC recordkeeping rules list the records a broker-dealer must create (blotters, ledgers, order memoranda, customer account records, communications with the public) and how long each type must be kept, generally 3 or 6 years. A separate FINRA rule sets the customer account information a firm must collect and keep for 6 years after an update.
NASAA has no model rule on broker-dealer books and records, and federal law limits state authority here. The exam instead tests the federal recordkeeping rules directly.
What Records Must a Broker-Dealer Create?
Under the SEC's records-to-be-made rule, broker-dealers must create and maintain:
- Blotters: daily records of every purchase, sale, receipt, delivery, and payment
- Ledgers: customer and firm accounts
- Order memoranda: details of every order received, including the time of entry, the terms, and the person who accepted the order
- Customer account records: name, address, investment objectives, and the associated person responsible for the account
- Records of communications with the public, including advertising and correspondence subject to review
- Customer complaints: all written complaints received
- Records related to associated persons: employment history and disciplinary actions
How Long Must Each Record Be Kept?
The SEC's records-to-be-preserved rule sets the retention period for each record type:
| Record type | Retention period |
|---|---|
| Blotters and ledgers | 6 years (first 2 years in an easily accessible place) |
| Account-opening and maintenance records | Generally 6 years, measured from account closure or the applicable update date |
| Order memoranda, confirmations, and account statements | 3 years (the first 2 years in an easily accessible place) |
| Written customer complaints | 4 years under the FINRA overlay |
| Communications with the public (advertising) | 3 years from last use |
| Written supervisory procedures | 3 years after the last date the procedure was in effect |
| Partnership articles, corporate charter, minute books, stock-certificate books | Life of the enterprise (and any successor enterprise) |
- Electronic records may be stored on non-erasable, non-rewritable (WORM) media, or under the SEC's audit-trail alternative
- A firm that outsources recordkeeping to a third-party service keeps full responsibility for compliance and must have policies to monitor that provider
Exam Tip: Gotchas
The 6-year and 3-year buckets are the two figures the exam tests most. Blotters, ledgers, and account records run 6 years; communications, order memoranda, confirmations, and account statements run 3 years. Corporate charter and partnership records are the outlier: kept for the life of the enterprise, with no added fixed term after that.
What Customer Account Information Must a Firm Keep?
FINRA's customer-account-information rule requires each firm to maintain, for every account, the customer's name and address and whether the customer is of legal age.
The associated person responsible for the account must also be recorded, except for institutional accounts, which are excluded from that item. For non-institutional accounts other than those limited to unrecommended open-end investment-company shares, the firm must also make a reasonable effort, before settlement of the account's initial transaction, to obtain the customer's tax ID or Social Security number, occupation, and employer.
- Any customer account information that is later updated must be preserved for at least 6 years after the update
- If the information is never updated, the original account information must be preserved for at least 6 years after the account closes
- The firm must also make a reasonable effort to obtain the name of and contact information for a trusted contact person (age 18 or older) it may reach about possible financial exploitation; institutional accounts are excluded from this requirement, and a non-institutional customer's refusal to provide one does not bar opening or keeping the account
How Does This Connect to Communications Supervision?
- Broker-dealers must retain all correspondence, not just what gets reviewed; only the supervisory review of correspondence may use risk-based sampling. Firms must also retain copies of all retail communications and records of principal approval
- These recordkeeping duties support the firm's general supervisory obligations
- The Administrator may prescribe and examine broker-dealer records, but federal law prevents a state from imposing a requirement that differs from or adds to the federal standard
Exam Tip: Gotchas
Federal preemption limits state rulemaking, not state examination. A state Administrator may still examine records to confirm compliance with the federal standard; it just cannot invent a new, state-only recordkeeping requirement.
What Should You Check on Exam Day?
- One SEC rule lists what records a firm must make; a companion SEC rule lists how long each type must be kept.
- Blotters, ledgers, and account records: 6 years, with the first 2 easily accessible. Order memoranda, confirmations, account statements, and communications with the public: 3 years (also first 2 easily accessible). Written complaints: 4 years under FINRA. Corporate/partnership records: life of the enterprise.
- FINRA's customer-account-information rule governs what account data must be collected and kept, generally 6 years after the account closes or the information is last updated, and also requires a reasonable effort to obtain a trusted contact person.
- A state Administrator can examine records for federal-standard compliance but cannot create a separate state-only recordkeeping requirement.