Books and Records

This unit ties four ideas together: comparing records, timing entries, retaining them, and avoiding the conduct that breaks the record trail.

Which One-Liners Win Points?

• A reconciliation is a comparison, not a total check. Matching aggregate totals does not satisfy the requirement if an underlying difference exists.
• The blotter is a daily record; the trial balance is a monthly proof. Do not swap a periodic summary for the required daily itemized entry.
• Falsification includes causing a record to be inaccurate. The rule is not limited to physically altering an existing document.
• A record can be improperly retained even though it still exists. Making it inaccessible before the preservation period ends is still a violation.
• Electronic storage may replace paper, but it cannot erase history. The system needs a time-stamped audit trail or non-rewriteable, non-erasable storage.
• Stopping a securities business does not end preservation duties. Each record stays preserved for the rest of its applicable retention period.
• Preservation and accessibility are separate requirements. A record can be retained the full period and still fail if it is not easily accessible during its first two years.
• An unresolved securities difference goes in the security count difference account. The difference must come from a required examination, count, verification, or comparison.

Which Numbers Matter Most?

How Do Reconciliations and Daily Records Stay Current?

• The firm records each unresolved long or short securities difference, found through a required examination, count, verification, or comparison, in a security count difference account.
• The blotter is the daily record of original entry: purchases, sales, securities movements, cash movements, and other debits and credits.
• Complete and current records must accurately support the firm's assets, liabilities, customer activity, and securities positions.

How Must Electronic Records Be Preserved?

• An electronic recordkeeping system may hold required records digitally when they can be viewed, downloaded, and reproduced, and when the system meets records-retention requirements.
• The system needs either a complete time-stamped audit trail of modifications and deletions that can recreate the original record, or exclusively non-rewriteable, non-erasable storage.
• The system automatically verifies its own storage and retention processes, and a backup or other redundancy preserves access if the original system is unavailable.
• On request by a Securities and Exchange Commission representative, the firm promptly furnishes a legible, true, complete, and current copy of a required preserved record.

Which Gotchas Trip Students Up?

• Improper maintenance covers a missing required detail. A current record is incomplete when a required field is missing, even if the record otherwise exists.
• Destroying or deleting a record too early only defeats retention when no compliant preserved or reconstructible record remains. Concealing a record or losing access before the period ends fails the same requirement.
• The first-two-years accessibility rule applies to blotters, ledgers, securities positions, confirmations, and many other transaction records, not to every record category.
• A reconciliation is not satisfied merely because totals appear close. Any securities difference found through a required count, verification, examination, or comparison must be recorded and addressed.

One-Breath Recap

Books and records comes down to four habits: compare, post, retain, and protect. A reconciliation matches the firm's books against cash, securities, or account evidence, and any unresolved securities difference goes into the security count difference account. The blotter captures every purchase, sale, and money or securities movement daily, while the trial balance and the capital computation follow on a monthly cycle. Retention periods run three years for most transaction records and six years for blotters, ledgers, and securities positions, each easily accessible for the first two years, while customer account records run six years after closing. Electronic systems must preserve history through an audit trail or non-rewriteable storage, verify themselves, and stay accessible. Falsifying, failing to maintain, or losing access early are all violations.

Need more than the recap? Read the full Books and Records unit.