Books and Records a Firm Must Make

Every downstream retention question in this unit assumes you already know what these records are and why a firm has to create them in the first place.

What Records Must a Firm Create?

The records-creation rule runs to more than thirty categories. These are the ones this exam leans on, and each must be made and kept current:

• Blotters: records of original entry with an itemized daily record of every purchase and sale of securities, every receipt and delivery of securities (including certificate numbers), every receipt and disbursement of cash, and all other debits and credits.
  • Each purchase or sale entry must also show the account it was effected for, the name and amount of the securities, the unit and aggregate price, the trade date, and the name or other designation of the person the securities came from or went to.
• General ledgers: records reflecting the firm's assets, liabilities, income, expense, and capital accounts.
• Customer ledger accounts: a separate ledger account for each cash, margin, or other account, itemizing purchases, sales, receipts, deliveries, and other debits and credits to that account. The rule requires this for every customer's account and for the firm's own accounts and those of its partners, so it is not a customers-only duty.
• Order memoranda: a record of each brokerage order, whether it was executed or not, showing:
  • its terms and conditions, and those of any modification or cancellation;
  • the account it was entered for, and the time received and entered;
  • the price at which it executed, and, to the extent feasible, the time of execution or cancellation;
  • each associated person responsible for the account, and any other person who entered or accepted the order for the customer.
  • An order entered under discretionary authority must be designated as such on the memorandum. That is a records duty, separate from the written authorization the account itself needs.
• Trial balances and net capital computations: proof of money balances of all ledger accounts, and the firm's aggregate-indebtedness and net-capital computation, prepared at least once a month.

Exam Tip: Gotchas

• Making a record and preserving it are two separate duties. A question describing how long a record must be kept, or how quickly it must stay accessible, is testing the preservation side even when the record it names, a blotter or an order ticket, is defined on the creation side.

How Does FINRA Layer Its Own Recordkeeping Framework on Top?

• FINRA does not rely on the SEC's creation and preservation rules alone. It maintains its own family of recordkeeping rules, each covering a distinct records topic: customer account information, written complaint records, and negotiable-instrument authorizations.
• FINRA's general recordkeeping rule sets the floor underneath that family: members must make and preserve books and records as required under FINRA rules, the Securities Exchange Act, and the applicable Exchange Act rules.
• Any FINRA book or record with no retention period specified elsewhere defaults to six years.
• FINRA's general recordkeeping rule also requires that any record made under a FINRA rule be preserved in a format and media that complies with the SEC's records-preservation rule. FINRA's own recordkeeping rules route back to the SEC's preservation rule for format.

Think of it this way: the SEC's two rules set the baseline for every broker-dealer. FINRA's rules sit on top, adding member-specific record categories and a catch-all six-year default for anything the baseline does not already cover.

What Should You Check on Exam Day?

• Match "how long" and "how accessible" questions to the preservation side, even when the record named belongs to the creation-side list.
• Default any FINRA record with no other stated retention period to six years.
• Remember FINRA's recordkeeping rules borrow the SEC's format standard rather than setting their own.