Registrations of Persons - Investment Advisers: Ongoing Requirements

Investment advisers must create and maintain all records (including books, marketing and correspondence) for a minimum of five years.

Record-Keeping: The following is a quote from a NASAA Model Rule adopted in 2003:

Every investment adviser subject to subsection (a) of this rule shall preserve the following records in the manner prescribed:

1. All books and records required to be made under the provisions of paragraph (a) to (c)(1), inclusive, of this Rule (except for books and records required to be made under the provisions of paragraphs (a)(11) and (a)(16) of this Rule), shall be maintained and preserved in an easily accessible place for a period of not less than five years from the end of the fiscal year during which the last entry was made on record, the first two years in the principal office of the investment adviser.


Exam Tips and Tricks!
Memorize the fact that the number of years required for recordkeeping is a MINIMUM of FIVE YEARS. It is highly likely you will be tested on this concept on your upcoming exam.

Investment Advisers: Books and Records
The books, records and financial reporting requirements of broker-dealers are governed by the SEC and the self-regulatory organizations (SRO), such as the exchanges and FINRA.

Federal law: the Securities and Exchange Act of 1934 prohibits states from imposing requirements on broker-dealers that are more extensive or burdensome. The Section of the '34 Act that spells this out is Section 15(h), which, in part, says:

"No law, rule, regulation, or order, or other administrative action of any state or political subdivisionthereof shall establish capital, custody, margin, financial responsibility, making and keeping records, bonding, or financial or operational reporting requirements for brokers, dealers, municipal securities dealers, government securities brokers, or government securities dealers that differ from, or are in addition to, the requirements in those areas established under this title."

The Official Comments that accompany the 2002 USA echo the Federal Law:

"... Under the National Securities Markets Improvement Act of 1996, States may not impose such requirements on covered broker-dealers and investment advisers greater than those specified in Section 15(h) of the Securities Exchange Act of 1934 and Section 222 of the Investment Advisers Act of 1940.

If, on the Series 63 exam, you see a reference to Section 15(h) just remember that the states cannot impose requirements on broker-dealers that are more difficult or extensive than those already mandated by the SEC.

The records of a broker-dealer's business must be maintained, by SEC Rule, for three years. The records that a broker-dealer maintains for its customer accounts must generally be maintained for six years.

Those investment advisers that are covered by the USA (not federal covered) are required to maintain records for five years by the Model Rules of NASAA that we mentioned earlier. The general requirement is:

"...All books and records required to be made under the provisions o f... this rule ... shall be maintained and preserved in an easily accessible place for a period of not less than five years from the end of the fiscal year during which the last entry was made on record, the first two years in the principal office of the investment adviser."

The SEC's specific requirements for a broker-dealer's minimum net capital depend on the nature of the firm's business and are beyond the scope of the Series 63. Just be aware that the financial stability requirements for broker-dealers are governed by SEC rules and that under federal law the states cannot impose more stringent requirements. Here again, Section 15(h) applies.

Exam Tips and Tricks
You will probably NOT see a question regarding financial reporting on the test as applied to investment advisers and broker-dealers because such requirements can easily differ from state to state. However if you do, it is wise to remember that a state cannot require an investment adviser or broker-dealer to report MORE FREQUENTLY than quarterly, though in most cases annual reporting is the norm!

Sarbanes-Oxley Act (SOA)
In July 2002, the Sarbanes-Oxley Act (SOA) introduced major changes to the regulation of corporate governance and financial practice. The act is named after its main architects, Senator Paul Sarbanes and Representative Michael Oxley.

  • The act really only affects corporate financial reporting, but will (in time) trickle through to the USA, and no doubt trigger some changes as well.
  • Though the SOA really only affected the USA in one way, you will still find a link to the act in the resources section of the study guide, should you want to read about it.
  • How did the SOA affect the USA? The federal statute of limitations for criminal charges was changed from two years to five years.
Related Articles
  1. Professionals

    Career Advice: Stockbroker Vs. Insurance Agent

    Compare and contrast careers as a stockbroker and insurance agent. Understand the skills and attributes required for success in each career.
  2. Economics

    What's the 1913 Federal Reserve Act?

    The 1913 Federal Reserve Act was a pivotal congressional act that helped establish the Federal Reserve System as it exists today. It is one of the United States financial system’s most influential ...
  3. Investing News

    Could a Rate Hike Send Stocks Higher?

    A rate hike would certainly alter the investment scene, but would it be for the better or worse?
  4. Professionals

    Will Interest Rates Rise at the Next Fed Meeting?

    Everyone wants to know what the Federal Reserve will do next, but the Fed doesn't even know what it's next move will be.
  5. Professionals

    Career Advice: Financial Analyst Vs. Investment Banker

    Read an in-depth comparison about working as a Financial Analyst vs. working as an Investment Banker, two highly prestigious business careers.
  6. Professionals

    3 ETFs to Play the Fed's Interest Rate Decision

    These three ETFs offer strong ways to play the Federal Reserve's decision not to raise rates.
  7. Professionals

    Who Needs to Take the Series 65?

    Most states require individuals to pass the Series 65 exam in order to act as investment advisors.
  8. Investing Basics

    How to Vet Financial Advisors Via BrokerCheck

    Many people research restaurants or movies, but few select brokers or financial advisors with much research. Here's how BrokerCheck can help.
  9. Professionals

    Career Advice: Financial Planner Vs. Stockbroker

    Read an in-depth review of a career as a financial planner as opposed to a career as a stockbroker, including how to decide which is best for you.
  10. Investing Basics

    Is a Rate Hike Already Priced Into the Market?

    Is the recent selloff in equities related to the Fed's probable interest rate hike, or are problems bigger than the Fed wants us to believe?
  1. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  2. Series 6

    A securities license entitling the holder to register as a limited ...
  3. Comprehensive Automated Risk Data ...

    The Comprehensive Automated Risk Data System (CARDS) is an initiative ...
  4. Corporate Financing Committee

    A regulatory group that reviews documentation that is submitted ...
  5. Division Of Reserve Bank Operations ...

    An entity under the Federal Reserve System that manages certain ...
  6. Series 79

    A examination to ensure a candidate is qualified to become a ...
  1. Is there a limit on the number of times I can re-take the Series 63 exam?

    There is no limit to the number of times a candidate may retake the Series 63 exam. The North American Securities Administrators ... Read Full Answer >>
  2. How long must I wait after failing the Series 63 exam before I can take it again?

    Waiting periods are in place for candidates who wish to retake the Series 63 exam. Between retakes, the waiting period is ... Read Full Answer >>
  3. My 120-day Series 63 exam window is about to close, but I need more time to study. ...

    Extensions are available on rare occasions. Candidates should apply for an extension with the North American Securities Administrators ... Read Full Answer >>
  4. Do I have to be a U.S. citizen to sit for the Series 63 exam?

    United States citizenship is not required for Series 63 test-takers. Candidates may take the exam inside or outside the U.S. ... Read Full Answer >>
  5. Are waivers granted to the 180-day waiting period to re-take the Series 63 exam?

    Candidates retaking the Series 63 exam must wait for 30 days after failing it on the first or second attempt. After failing ... Read Full Answer >>
  6. If I failed the Series 66, does the waiting period apply if I want to take the Series ...

    The waiting period only applies to retaking the same North American Securities Administrators Association (NASAA) exam. Candidates ... Read Full Answer >>
  7. How often, and how, is a series 63 exam updated?

    Series 63 exams draw questions from a test bank based on state regulations, the Uniform Securities Act and North American ... Read Full Answer >>
  8. Are series 63 exams given outside of the United States?

    Series 63 exams are offered at authorized testing centers around the world. The exam does not require U.S. citizenship. Test ... Read Full Answer >>
  9. Does NASAA or anyone else give out the series 63 exam questions?

    Outside of the proctored exam, no access to Series 63 exam questions is offered. Providing access to questions would invalidate ... Read Full Answer >>
Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!