Post-Registration Books, Records & Inspections
Covers the 3-year record retention rule for broker-dealers under SEC Rule 17a-4, customer ledgers, blotters, and Administrator surprise audit authority.
- Broker-Dealer records must be maintained for 3 YEARS total, the first 2 years in an easily accessible location.
- (Compare with Investment Advisers who must retain records for 5 YEARS total, first 2 easily accessible).
- The state Administrator may conduct unannounced, surprise inspections of registrant records at any time, within or outside the state.
Registered broker-dealers must create and maintain extensive financial and customer trading records, including order tickets, customer account ledgers, cash blotters, and customer correspondence. Under federal SEC Rule 17a-4 (which preempts state rules under NSMIA), these general records must be retained for at least 3 years, with the first 2 years kept in an easily accessible location.
Under Section 203(d) of the Uniform Securities Act, all records of a registered firm are subject at any time to reasonable periodic, special, or other examinations by representatives of the Administrator, within or without the state.
The Administrator does not need a subpoena, search warrant, or prior notice to conduct a compliance examination. Registrants must provide immediate access to customer accounts, order files, and supervisory correspondence.
- Do not mix up the 3-year retention clock for BDs with the 5-year retention clock for IAs.
- Branch managers cannot demand 48 hours notice or a court search warrant before an Administrator examination; surprise audits are statutory.
Under SEC Rule 17a-4 and the Uniform Securities Act, registered broker-dealers must create and maintain blotters, customer ledgers, order tickets, and trade confirmations. For how many years must a broker-dealer preserve these general records, and for how long must they be kept in an easily accessible place?