Books and Records Requirements
With account types and their specific requirements covered, this final section addresses the recordkeeping obligations that apply across all account types. Securities and Exchange Commission (SEC) Rules 17a-3 and 17a-4 define what records must be created and how long they must be kept.
SEC Rule 17a-3 - Records to Be Made
Registered broker-dealers must create and maintain:
- Trade blotters (daily records of purchases and sales)
- Asset and liability ledgers
- Income ledgers
- Customer account ledgers
- Securities records (positions)
- Order tickets (records of each order)
- Trade confirmations
- Trial balances
- Customer account records (for accounts with natural persons)
Customer Account Record Requirements (17a-3(a)(17))
For each account with a natural person as customer or owner, the broker-dealer must create a record including:
- Customer's name, tax ID, address, telephone number, date of birth
- Employment status and occupation
- Annual income and net worth
- Investment objectives
A copy of this record must be furnished to the customer:
- Within 30 days of account opening
- At least every 36 months thereafter
- Whenever certain account information is materially changed
Exam Tip: Gotchas
- 30 days and 36 months are DELIVERY requirements (how quickly the customer gets a copy). The retention period (how long the firm keeps records) is 6 years - a completely separate requirement.
SEC Rule 17a-4 - Records to Be Preserved
| Record Type | Retention Period | Notes |
|---|---|---|
| Customer account records | 6 years | After the earlier of account closure or last update |
| General business records | 3 years | First 2 years in an easily accessible place |
| Communications (incoming and outgoing) | 3 years | First 2 years in an easily accessible place |
| Partnership articles, corporate charter | Life of enterprise + 3 years | After termination of the enterprise |
Exam Tip: Gotchas
- Customer account records = 6 years. General business records and communications = 3 years. These are different retention periods for different record types - do not confuse them.
- The "2-year accessibility" rule is a testable detail. General business records must be kept for 3 years, but the first 2 years must be in an "easily accessible place."
Federal vs. State Recordkeeping Authority
- The North American Securities Administrators Association (NASAA) has not issued a model rule related to broker-dealer books and records
- Federal law limits state regulatory authority on recordkeeping; SEC and FINRA set the primary standards
- However, the Series 63 exam does test SEC and Financial Industry Regulatory Authority (FINRA) recordkeeping rules (specifically 17a-3, 17a-4, and FINRA Rule 4512)