Registration & Licensing - Maintenance

Question 1

SEC retention periods for broker-dealer records - Customer Correspondence and Emails

Answer 1

3 years

Question 2

SEC retention periods for broker-dealer records - Customer Trade Confirmations

Answer 2

3 years

Question 3

SEC retention periods for broker- dealer records - Customer Account Statements

Answer 3

6 years

Question 4

How long must Federal Covered Advisers keep records?

Answer 4

5 years

Question 5

NASAA requires that State registered advisers maintain the following types of records:

Answer 5

Journals of original entry (cash receipts and disbursements)

General ledger and trial balances;

Order ticket copies;

Copies of canceled checks, bank statements and bank reconciliations;

Originals of all written communications sent to or received from clients;

List of discretionary accounts;

Copy of each power of attorney granted to adviser;

Copy of each advisory agreement entered into with a client;

Copy of each notice, circular, advertisement, article investment letter, etc. sent to 2 or more customers;

Record of each securities transaction except for transactions in US Government securities;

Initial Form U-4 and each amendment

Question 6

Define “advertising”

Answer 6

Communication to more than 1 person; can include recommendations of the purchase or sale of a specific security; if the communication does not state the reason for the recommendation, a memo must be retained indicating the reasons for the recommendation.

Question 7

Regarding records of securities transactions, when must customer accounts be posted?

Answer 7

No later than 10 business days after the end of the calendar quarter in which the trade occurs.

Question 8

When must broker-dealers post customer account transactions?

Answer 8

on settlement

Question 9

Rule regarding e-mail retention

Answer 9

Both business and personal emails sent and received by agents must be retained by the broker-dealer or investment adviser.

Question 10

Rule regarding Electronic Recordkeeping

Answer 10

Electronic storage is permitted on computer disks, computer tapes, or any other digital medium that must be non-rewritable and non-erasable; a separate duplicate copy must be retained in another location.

Question 11

Recordkeeping rules for adviser with multiple locations

Answer 11

Only need to comply with rules of state in which adviser’s principal office is located.

This does not apply to broker-dealers.

Question 12

Recordkeeping rules for adviser that takes custody of client funds?

Answer 12

It must retain, in its principal office, for a period of 5 years, a copy of:

Client purchase and sales history; and

Current client securities positions

Question 13

Overall record retention rule

Answer 13

All records must be kept for 5 years in an easily accessible place with the first 2 years’ records kept in the principal office of the adviser

Question 14

What are “permanent records”

Answer 14

Investment adviser’s articles of incorporation, minutes to Board of Directors’ meetings, stock certificate books, partnership articles and any amendments.

Question 15

Rule for “permanent records” recordkeeping

Answer 15

These must be retained for the life of the enterprise and must be retained for 3 more years after the enterprise is terminated (*)

Question 16

Who does “reports to customers” rules apply to?

Answer 16

Investment advisers; not broker-dealers

Question 17

What is covered by “reports to customers” rules?

Answer 17

“Investment Advisory Brochure” given to prospective customers at least 48 hours prior to entering into any investment advisory contract. The brochure gives full disclosure to the customer.

Question 18

What occurs if any filing with the Administrator is found to have material errors or omissions?

Answer 18

The registrant must file a correcting amendment promptly; if the amendment corrects an initial registration application, the registration does not become effective until 30 days have elapsed from the filing of the amendment.

Question 19

Inspections rule

Answer 19

All records are subject to periodic examination by representatives of the Administrator, which can also be performed by FINRA or SEC representatives; The Administrator can inspect records, both in the State and outside the State, and can conduct “surprise” visits.

Question 20

Rule for Advertising and Sales Literature

Answer 20

May be required to be filed in the State unless the security or transaction is exempt, or unless the security involved is a federal covered security.

Question 21

What is sales literature?

Answer 21

A communication that goes to a specific audience, including market and research reports, form letters that are not broadly distributed, password-protected websites, etc.