Under Section 17 of the Securities Exchange Act of 1934, every national securities exchange, national securities association, registered clearing agency and the Municipal Securities Rulemaking Board shall keep and preserve at least one copy of all documents, including all correspondence, memoranda, papers, books, notices, accounts and other such records as shall be made or received by it in the course of its business as such and in the conduct of its self-regulatory activity. These records must be kept for at least five years and, for the first two years, must be held in an easily accessible place.

Rule 17a-3
Broker-dealers must maintain some records for at least six years (two years in an easily accessible place) including the following:

  • 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. Such records shall show the account for which each such transaction was effected, the name and amount of securities, the unit and aggregate purchase or sale price (if any), the trade date and the name or other designation of the person from whom securities were purchased or received or to whom they were sold or delivered.

  • 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 and of such member, broker or dealer and partners thereof, all purchases, sales, receipts and deliveries of securities and commodities for such account and all other debits and credits to such account.

  • Employment applications or questionnaires from each registered representative and other associated persons of the firm

Rule 17a-4
The following records must be maintained by broker-dealers for at least three years (at least two years in an easily accessible place):

  • All check books, bank statements, cancelled checks and cash reconciliations

  • All bills receivable or payable (or copies thereof), paid or unpaid, relating to the business of such member, broker or dealer, as such

  • Originals of all communications received and copies of all communications sent by such member, broker or dealer (including inter-office memoranda and communications) relating to his or her business as such

  • All trial balances, computations of aggregate indebtedness and net capital (and working papers in connection therewith), financial statements, branch office reconciliations and internal audit working papers relating to the business of such member, broker or dealer, as such

  • Fingerprint records

  • Customer confirmations and other notices

  • Order tickets for all purchases and sales of securities

Rule 17a-5
Broker-dealers are required to file certain financial reports on a regular basis. A general partner or other authorized officer of the firm must prepare an affidavit attesting to the truth or correctness of the return.

The annual report of financial condition must be certified by an independent public accountant. The report must contain a balance sheet and the firm's net capital and required minimum net capital must be included in the footnotes.

An audited financial statement must also be filed annually with the SEC within 60 days of the date of the statement and must be sent to customers within 45 days of the SEC filing. Should the SEC find any material inadequacies, customers must be notified that a report of the inadequacies is available for inspection at the SEC.

Financial and Operational reports (known as FOCUS reports) must be filed monthly by broker-dealers that clear or carry customer securities. FOCUS Part I must be filed within 10 business days of the end of the month. FOCUS Part II must be filed quarterly within 17 business days of the end of the quarter. Firms that do not clear or carry are only required to file Part II of the FOCUS report.

Rule 17a-8
This SEC rule covers financial recordkeeping and the reporting of currency and foreign transactions. While Rule 17a-4 requires records to be kept for six years (the first two years in an easily accessible place), 17a-8 requires these foreign transactions to be kept for the longer of the period required under 17a-3 and the period required under part 103 of title 31 of the Code of Federal Regulations.

Rule 17a-11
Broker-dealers must notify the SEC when certain financial conditions change, including:

  • Net capital declines below the required minimum
  • Aggregate indebtedness exceeds 1200% of its net capital
  • Total net capital is less than 120% of required minimum net capital

Rule 17f-1
Broker-dealers must report to the SEC within one business day of discovery of theft or loss of securities where there is a substantial basis for believing criminal activity is involved. Such a report must also be filed with the FBI. Missing or lost securities that are not believed to be involved with criminal activity must be reported after two days (one business day after the two day period). Exemptions to a report are allowed for certain situations, including:

  • Securities lost in transit must be reported within two business days after notice of non-receipt.

  • Securities lost or missing as a result of securities counts or verification must be reported within ten business days after completion of the count or verification (or as soon as possible after the certificate numbers can be ascertained).
FINRA Rules

Related Articles
  1. Personal Finance

    Policing The Securities Market: An Overview Of The SEC

    Find out how this regulatory body protects the rights of investors.
  2. Investing

    SEC Filings: Forms You Need To Know

    The forms companies are required to file provide a clear view of their histories and progress.
  3. Financial Advisor

    On The Record: Communications With The Public

    NASD Rule 2211 can make or break your career as a registered principal.
  4. Investing

    Understanding The Top SEC filing forms

    It's easier than ever to keep track of your SEC filing status online.
  5. Investing

    Using Public SEC Filings To Analyze Companies

    Reports from the Securities and Exchange Commission provide investors with an edge in determining the investment value of companies. Learn what to look for in these financial reports.
  6. Financial Advisor

    What Advisors Need to Know About Rule 3210

    Here's what advisors and brokers need to know about FINRA Rule 3210.
  7. Investing

    Speed Read SEC Filings For Hot Stock Picks

    SEC forms can be a real headache. Find out how to make your research more efficient - and more effective.
  8. Trading

    Basics Of The Mechanics Behind Electronic Trading

    What was once associated with shouting traders and wild hand gestures has now become more closely associated with statisticians and computer programmers.
  9. Financial Advisor

    How To Get A Job At The SEC

    Want to make a good living taking on those renegade trading rascals on Wall Street? Here are some tips to help you get in the door at the SEC.
  10. Personal Finance

    Accountant: Job Description & Average Salary

    Discover what the job description of an accountant entails, along with education and training, salary and skills necessary for success.
Frequently Asked Questions
  1. Is There a Difference Between the Equity Market and the Stock Market?

    Equities and stocks refer to the same thing.
  2. What Happens to a Company's Stock When it Goes Bankrupt?

    Shareholders may be entitled to a portion of the liquidated assets in the wake of a bankrutpcy, but the stock will be worthless.
  3. What are Advantages and Disadvantages of Preference Shares?

    Preference shares have advantages and disadvantages for both investors and issuing companies.
  4. When am I eligible to receive Social Security benefits?

    Understand when you are eligible to begin collecting Social Security retirement benefits and how retiring at different ages ...
Trading Center