Recordkeeping Requirements
SEC Rules 17a-3 and 17a-4 establish comprehensive recordkeeping requirements for broker-dealers. Understanding what records must be kept and for how long is essential for compliance.
Overview of Rules 17a-3 and 17a-4
| Rule | Purpose |
|---|---|
| 17a-3 | What records must be CREATED |
| 17a-4 | How long records must be PRESERVED |
These rules form the backbone of broker-dealer recordkeeping requirements.
Records That Must Be Created (17a-3)
Transaction Records
| Record Type | Description |
|---|---|
| Blotters | Daily records of purchases, sales, receipts, deliveries |
| Trade tickets | Order memoranda |
| Confirmations | Copies of all customer confirmations |
| Account statements | Copies sent to customers |
Customer Records
| Record Type | Description |
|---|---|
| Account records | Name, address, SSN, employment |
| Customer agreements | Signed agreements and authorizations |
| Suitability information | Investment profile data |
| Correspondence | Communications with customers |
Financial Records
| Record Type | Description |
|---|---|
| General ledger | All assets, liabilities, income, expense |
| Stock record | Position record for all securities |
| Trial balances | Monthly |
| Financial statements | Quarterly and annual |
Compliance Records
| Record Type | Description |
|---|---|
| Supervisory records | Reviews and approvals |
| Exception reports | Surveillance reports |
| Customer complaints | Written complaints and resolutions |
| Communications | Emails, texts, social media |
Retention Periods (17a-4)
6-Year Retention
| Record Type | Requirement |
|---|---|
| Trade blotters | 6 years (first 2 accessible) |
| General ledger | 6 years (first 2 accessible) |
| Stock record | 6 years (first 2 accessible) |
| Customer account records | 6 years after account closed |
| Trial balances | 6 years |
3-Year Retention
| Record Type | Requirement |
|---|---|
| Communications | 3 years (first 2 accessible) |
| Confirmations | 3 years |
| Canceled checks | 3 years |
| Bills and statements | 3 years |
| Compliance manuals | 3 years |
| Customer complaints | 3 years |
Lifetime Retention
| Record Type | Requirement |
|---|---|
| Articles of incorporation | Life of firm |
| Partnership agreements | Life of firm |
| Minute books | Life of firm |
| Form BD | Life of firm |
| Forms U4 and U5 | 3 years after termination |
Accessibility Requirements
The "first 2 years accessible" requirement means:
- Records must be readily accessible
- Can be retrieved quickly for examination
- Not archived in off-site storage
Electronic Recordkeeping
2022 Amendments (Effective 2023)
The SEC modernized electronic recordkeeping requirements:
| Option | Description |
|---|---|
| WORM Storage | Write Once, Read Many - traditional unalterable format |
| Audit Trail Alternative | System maintains complete audit trail for modifications |
Requirements for Electronic Storage
- Records must be immediately accessible
- Must be able to produce legible copies
- Must maintain backup records
- Must allow for regulatory examination
Off-Channel Communications
2025 Enforcement Focus
FINRA and SEC have imposed over $2 billion in fines for recordkeeping failures related to off-channel communications:
| Violation | Issue |
|---|---|
| Personal texts | Business communications on personal devices |
| WhatsApp/Signal | Messaging apps not captured by firm systems |
| Personal email | Using non-firm email for business |
Key Point: ALL business communications must be captured and retained, regardless of channel.
Third-Party Recordkeeping
Firms may use third-party services to maintain records if:
- Firm retains direct and prompt access
- Regulatory access is ensured
- Records can be produced upon request
- Firm remains responsible for compliance
Regulatory Examinations
What Regulators Review
| Area | Focus |
|---|---|
| Books and records | Completeness and accuracy |
| Retention compliance | Proper retention periods |
| Accessibility | Can records be produced quickly |
| Electronic systems | Proper storage and backup |
2025 FINRA Focus
From FINRA's 2025 Regulatory Oversight Report:
- Books and records remains top examination priority
- ~40% of SEC broker-dealer cases involve recordkeeping
- Off-channel communications continue to be focus area
Consequences of Non-Compliance
| Consequence | Description |
|---|---|
| Fines | Can be substantial (millions for large firms) |
| Suspension | Business operations may be limited |
| Enhanced supervision | Additional oversight required |
| Reputational harm | Loss of customer and regulator trust |
Key Exam Points
- 17a-3 - What records to CREATE
- 17a-4 - How long to PRESERVE
- 6 years - Blotters, ledgers, customer accounts
- 3 years - Communications, confirmations, complaints
- First 2 accessible - Readily retrievable
- Lifetime - Corporate formation documents
- All communications - Must capture texts, emails, social media
- $2+ billion fines - Off-channel communication violations
Under SEC Rule 17a-4, how long must customer account records be retained?
What is the retention requirement for general correspondence with customers under SEC Rule 17a-4?
A broker-dealer employee conducts business communications through personal text messages that are not captured by firm systems. What regulatory concern does this raise?
6.6 Error Resolution
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