Customer Statements Recordkeeping

I’ve seen other SIE prep materials state that customer ledgers (statements) have to be kept on file for 6 years but you guys have it listed under records to be kept for 3 years. Can you guys clear that up for me a little bit? Thanks!

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Hi @Persistent_crimson_s - great question! In regards to other material from other vendors, you’ll find some agree with us and say customer statements require a 3 year retention period, while others disagree and say they require a 6 year retention period. I don’t know their process for writing material, but I’ll provide some insight into how I research material for Achievable.

First, spoiler alert: we believe the law requires a 3 year retention period for customer ledgers (statements), regardless of what other vendors are teaching.

Now, let’s dive into the law…

Warning: we’re about to go “in the weeds.”

Record retention rules are SEC regulated through the Securities Exchange Act of 1934. You can find the SEC’s final rules regarding record retention requirements on this page. Scroll down far enough and you’ll find this language:

A. General Record Retention Requirements

Paragraphs (a) and (b)(1) of Rule 17a-4 list certain records required under Rule 17a-3 that must be kept for six and three years, respectively.

So, broker-dealers must generally keep most records on file for three or six years. Rule 17a-4 is from the Securities Exchange Act of 1934, and can be found on this website. Here’s some of the language in the law:

Every member, broker or dealer subject to § 240.17a-3 must preserve for a period of not less than three years, the first two years in an easily accessible place:

(8) Records which contain the following information in support of amounts included in the report prepared as of the fiscal year end on Part II or IIA of Form X-17A-5 (§ 249.617 of this chapter), as applicable, and in the annual financial statements filed with the Commission required by § 240.17a-5(d), § 240.17a-12(b), or § 240.18a-7(c), as applicable:

(i) Money balance and position, long or short, including description, quantity, price, and valuation of each security including contractual commitments in customers’ accounts, in cash and fully secured accounts, partly secured accounts, unsecured accounts, and in securities accounts payable to customers;

(ii) Money balance and position, long or short, including description, quantity, price and valuation of each security including contractual commitments in non-customers’ accounts, in cash and fully secured accounts, partly secured and unsecured accounts, and in securities accounts payable to non-customers;

(iii) Position, long or short, including description, quantity, price and valuation of each security including contractual commitments included in the Computation of Net Capital as commitments, securities owned, securities owned not readily marketable, and other investments owned not readily marketable;

(iv) Amount of secured demand note, description of collateral securing such secured demand note including quantity, price and valuation of each security and cash balance securing such secured demand note;

(v) Description of futures commodity contracts or swaps, contract value on trade date, market value, gain or loss, and liquidating equity or deficit in customers’ and non-customers’ accounts;

(vi) Description of futures commodity contracts or swaps, contract value on trade date, market value, gain or loss, and liquidating equity or deficit in trading and investment accounts;

(vii) Description, money balance, quantity, price, and valuation of each spot commodity, and swap position or commitments in customers’ and non-customers’ accounts;

(viii) Description, money balance, quantity, price, and valuation of each spot commodity, and swap position or commitments in trading and investment accounts;

(ix) Number of shares, description of security, exercise price, cost and market value of put and call options including short out of the money options having no market or exercise value, showing listed and unlisted put and call options separately;

(x) Quantity, price, and valuation of each security underlying the haircut for undue concentration made in the Computation for Net Capital;

(xi) Description, quantity, price and valuation of each security and commodity position or contractual commitment, long or short, in each joint account in which the broker or dealer has an interest, including each participant’s interest and margin deposit;

(xii) Description, settlement date, contract amount, quantity, market price, and valuation for each aged failed to deliver requiring a charge in the Computation of Net Capital pursuant to § 240.15c3-1 or § 240.18a-1, as applicable;

(xiii) Detail relating to information for possession or control requirements under § 240.15c3-3 or § 240.18a-4, as applicable and reported in Part II or IIA of Form X-17A-5 (§ 249.617 of this chapter), as applicable;

(xiv) Detail relating to information for security-based swap possession or control requirements under § 240.15c3-3 or § 240.18a-4, as applicable, and reported in Part II or IIA of Form X-17A-5 (§ 249.617 of this chapter);

(xv) Detail of all items, not otherwise substantiated, which are charged or credited in the Computation of Net Capital pursuant to § 240.15c3-1 or § 240.18a-1, as applicable, such as cash margin deficiencies, deductions related to securities values and undue concentration, aged securities differences, and insurance claims receivable;

(xvi) Detail relating to the calculation of the risk margin amount pursuant to § 240.15c3-1(c)(17) or § 240.18a-1(c)(6), as applicable; and

(xvii) Other schedules which are specifically prescribed by the Commission as necessary to support information reported as required by §§ 240.17a-5, 240.17a-12, and 240.18a-7, as applicable.

Phew… that was a lot! Regardless, I interpret the items listed above as details that would show up on a customer statement. Details regarding security values, number of shares or units, money balances, long or short positions, etc. These are items that appear on a ledger (statement).

Now, let’s look at the section of the law that references six year retentions:

(c) Every member, broker or dealer subject to § 240.17a-3 must preserve for a period of not less than six years after the closing of any customer’s account any account cards or records which relate to the terms and conditions with respect to the opening and maintenance of the account.

That’s it for six year documents. It’s possible part of this could be interpreted as relating to a statement. For example, is a statement considered an ‘account card’ or ‘account record?’ I personally don’t think so, and this sounds like the customer account records we reference in the Achievable material. Account cards/records typically relate to blotters (internal transaction records) in my experience.

This part of the material is up to some legal interpretation, but I believe we are correct with the way we present the material. Hopefully the information listed above explains why.

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Thanks for the great response; really interesting to see your thought process!

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