An examiner's first request is rarely about trades. It is a list of records. A firm that cannot produce a blotter, a complaint file or a taped call on demand has a supervision problem before anyone reads a single recommendation.
Regulators cannot sit in your office every day, so they supervise you through your paper trail. The Securities Exchange Act of 1934 (Exchange Act) supplies that authority in Section 17. Section 17 covers accounts, records, reports and examinations of exchanges, members and others. Section 17(a)(1) requires broker-dealers to make and keep the records the Securities and Exchange Commission (SEC) prescribes, for prescribed periods, and to furnish copies and file reports. Section 17(b) makes those records subject to examination by the SEC and the firm's other regulators at any time.
The SEC carries out Section 17 through two companion rules. Exchange Act Rule 17a-3 lists the records a firm must make, such as blotters, ledgers, order tickets and account records. Exchange Act Rule 17a-4 sets how long each record is preserved and in what form.
Common mistakes
- Three years for account agreements. Customer agreements follow the 6-years-after-closing account period, not the 3-year floor.
- Three or six years for complaints. Rule 4513 says four, with the file at the OSJ or promptly available there.
- Assuming WORM is still mandatory. WORM-only thinking predates the 2023 audit-trail option.
Bottom line
- Rule 17a-4 keeps blotters and the general and customer ledgers 6 years, transaction and bank records, communications and agreements 3 years, account-terms records 6 years after closing, and Forms BD and BDW for life.
- FINRA keeps complaints 4 years under Rule 4513 and applies a 6-year default under Rule 4511 when no FINRA or Exchange Act rule names a period.
- Since 2023, Rule 17a-4(f) accepts either a WORM system or a complete time-stamped audit trail, backed by an undertaking filed with the DEA.
- Rule 17a-4(l) keeps an office's last 2 years of records at the office unless it is a qualifying residence or the firm produces them promptly.
Exam shortcut
When a stem names a record, ask what event starts its clock: Blotters and the general and customer ledgers run 6 years. Transactions, bank records, trial balances, communications and agreements run 3 years. Account-terms records run 6 years after closing, and superseded account information 6 years after its update. Anything tied to a person or a manual runs 3 years after the relationship or use ends.
The full lesson (about 4,683 words, 31 min read) adds 2 worked examples, all 5 common mistakes, a self-check, free in the app.
Learning objectives
- B8
Browse all free Series 24 lessons or jump into free Series 24 practice questions.