Post-Registration Requirements

Once a broker-dealer's (BD's) registration becomes effective, the obligations don't stop. The Uniform Securities Act (USA) and SEC rules impose ongoing requirements for recordkeeping, financial reporting, correcting amendments, and cooperation with examinations.

Books and Records

Every registered broker-dealer (BD) must make and keep accounts, correspondence, memoranda, papers, books, and other records as the Administrator prescribes by rule or order.

In practice, BD recordkeeping follows federal standards under SEC Rules 17a-3 and 17a-4 rather than separate state rules.

SEC Rule 17a-3: Records to Be Made

Rule 17a-3 requires BDs to create and maintain accurate, current records including:

• Blotters (books of original entry) for receipts and deliveries of securities, receipts and disbursements of cash
• Ledgers reflecting assets, liabilities, income, expenses, and capital
• Customer account records (name, address, investment objectives, authorized persons)
• Transaction records for each purchase and sale of securities
• Copies of confirmations sent to customers
• Records of associated persons (agents), including names, addresses, dates of employment, and compensation
• Written customer complaint records

SEC Rule 17a-4: Records to Be Preserved

Rule 17a-4 specifies minimum retention periods for BD records:

The 2-year accessibility rule: For all records, the first 2 years of each retention period must be kept in an easily accessible location.

Electronic storage: Records may be stored electronically, provided the format meets SEC requirements. The two options are WORM (write once, read many) or an audit-trail alternative that maintains a complete time-stamped record of changes.

Exam Tip: Gotchas

The 6-year vs. 3-year distinction is heavily tested. A simple way to sort them: anything that records money or transactions (blotters, ledgers, customer accounts, transaction records) gets 6 years. Anything that records communications (correspondence, advertising, sales literature) gets 3 years. Customer complaints are the exception at 4 years. And for ALL records, the first 2 years must be easily accessible.

Financial Reports

• Every registered broker-dealer (BD) must file financial reports as the Administrator prescribes by rule or order
• State authority is subject to the limitations of the Securities Exchange Act (SEA); the state cannot impose requirements that conflict with or exceed federal standards

Correcting Amendments

• If information in any document filed with the Administrator becomes inaccurate or incomplete in any material respect, the registrant must file a correcting amendment promptly
• This is an ongoing obligation that does not end once registration becomes effective
• Material changes include: change of address, change in ownership, new disciplinary history, change in financial condition

Administrator's Examination Authority

The Administrator has broad authority to examine broker-dealer (BD) records:

• All BD records are subject to examination at any time
• The Administrator (or designated representatives) may examine records within or without the state
• Examinations must be reasonable: periodic, special, or as the Administrator deems necessary in the public interest or for investor protection
• To avoid duplication, the Administrator may cooperate with other state administrators, the SEC, national securities exchanges, and national securities associations (such as FINRA)

Consequences of refusal: A BD that refuses to submit to a reasonable examination faces:

• Injunction
• Revocation of registration (if willful)
• Criminal prosecution (if willful)

Exam Tip: Gotchas

The Administrator can examine BD records "at any time" without a subpoena. This is a visitorial power, which is distinct from the Administrator's separate subpoena power. No prior notice or court order is required for a routine examination. The BD must simply make records available.

Now that you understand a BD's recordkeeping and reporting obligations, let's look at how firms must supervise the people who work for them.