Record Retention Requirements for Securities Brokers and Dealers
Brokers and dealers engaging in securities transactions are required to maintain various records for varying periods under Securities and Exchange Commission rules. For example, "blotters" reflecting all purchases and sales of securities must be retained for six years. Copies of sale or purchase confirmations must be kept in an easily accessible place for two years and then for an additional year thereafter.
Investors will need records of the securities transactions for tax and accounting purposes and possibly for proof of the transactions in the event of any claim concerning the transactions. However, if the investor has not maintained account statements, trade confirmations, and other securities transactions records, the broker or dealer that the investor dealt with may have such records. Securities Exchange Act Rule 17a-3 describes records to be made by members of exchanges and brokers and dealers, and Securities Exchange Act Rule 17a-4 describes how long and in what manner records must be preserved.
There are 22 categories of records described in 17 C.F.R. ¤ 240.17a-3 that must be maintained. The categories and sub-categories include records such as:
- Blotters (or other records of original entry) containing an itemized daily record of all purchases and sales of securities, all receipts and deliveries of securities (including certificate numbers), all receipts and disbursements of cash and all other debits and credits.
- Ledgers (or other records) reflecting all assets and liabilities, income and expense and capital accounts.
- Ledger accounts (or other records) itemizing separately as to each cash and margin account of every customer all purchases, sales, receipts, and deliveries of securities and commodities for such account and all other debits and credits to such account.
- Ledgers (or other records) reflecting the following:
- Securities in transfer;
- Dividends and interest received;
- Securities borrowed and securities loaned;
- Moneys borrowed and moneys loaned (together with a record of collateral and any substitutions in such collateral);
- Securities that failed to be received or failed to be delivered;
- All long and all short securities record differences arising from the examination, count, verification, and comparison (by date of examination, count, verification, and comparison showing for each security the number of long or short count differences); and
- Repurchase and reverse repurchase agreements.
- A securities record or ledger reflecting separately for each security as of the clearance dates all "long" or "short" positions.
- A memorandum of each brokerage order, and of any other instruction, given or received for the purchase or sale of securities, whether executed or unexecuted.
- A memorandum of each purchase and sale for the account of the member, broker, or dealer.
- Copies of confirmations of all purchases and sales.
- A record for each cash and margin account.
- A record of all puts, calls, spreads, straddles, and other options.
- A record of the proof of money balances of all ledger accounts.
- A questionnaire or application for employment executed by each "associated person."
- A record as to each associated person of each written customer complaint received.
- A record as to each associated person listing each purchase and sale of a security attributable, for compensation purposes, to that associated person.
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