Quick Answer
No rule defines the subscription agreement or gives it a retention category of its own. The firm keeps it in place of the order memorandum, so it rides in that memorandum's category: at least three years, the first two easily accessible. It is not the written-agreements category, which reaches only agreements the firm enters into.
The exam tests the subscription agreement's retention as its own question, separate from the order-memorandum exception covered earlier in this unit. The two rules involved are not the same rule.
Which Rule Sets the Subscription Agreement's Retention Period?
- One rule does name the document: the records-creation rule names the "subscription agreement" as the record a firm may keep instead of an order memorandum for a subscription-way purchase; a sale or redemption substitutes a different issuer-required document. But that rule is about the order-ticket exception, not retention, and no rule defines the subscription agreement or gives it a retention category of its own.
- That same order-ticket paragraph is what puts the document in the firm's hands. It excuses the order memorandum only if the firm keeps the subscription agreement copy, so the copy stands in the place of the memorandum it replaces.
- The records-preservation rule covers every record made under that order-memorandum paragraph. The subscription agreement copy rides in with them, in the same category as the memorandum it stood in for.
- Do not reach for the general written-agreements category instead. That category covers written agreements the firm itself enters into, and the firm is not a party to an agreement between the investor and the issuer. The retention period is the same either way. The route is not.
Exam Tip: Gotchas
- "Subscription agreement" appears in the records-creation rule's order-ticket exception, not in a retention rule. Do not treat that mention as the source of the retention period.
- The written-agreements category is the wrong route, and the reason is the party. That category reaches agreements the firm enters into. The investor and the issuer are the parties to a subscription agreement.
How Long Must the Subscription Agreement Be Kept?
- The records-preservation rule sets the retention period for that category, and every other category it lists, at not less than three years, with the first two years in an easily accessible place.
- That lands the subscription agreement in the same bucket as order memoranda and most other transaction records: three years, the clock starting at the record's creation, with the first two years easily accessible.
Think of it this way: the subscription agreement does not get a special rule of its own. It rides along with the same three-year, creation-dated bucket that covers the order memoranda it stands in for.
What Should You Check on Exam Day?
- Do not confuse the order-ticket exception's mention of "subscription agreement" with a retention rule; retention comes from a different rule.
- Retain the subscription agreement at least three years from its creation, with the first two years easily accessible.
- Trace the retention to the order-memorandum category the copy replaces, not to the written-agreements category and not to a document-specific rule.