FINRA Rule 4511: General Requirements for Preservation of Books and Records

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The Rule 4511 of Financial Regulatory Authority (FINRA) includes the general archiving requirements with which broker-dealers must comply. The rule – which is based on the general recordkeeping requirements of NASD Rule 3110 and NYSE 440 clarifies that firms are required to:

  1. Make and preserve books and records under the FINRA rules, the Securities Exchange Act (SEA), and the applicable SEA rules.
  2. Preserve for a period of at least six years those FINRA books and records for which there is no specified retention under the FINRA rules or applicable SEA rules.
  3. Preserve the books and records required to be made under the FINRA rules in a format and media that complies with SEA rule 17a-4.

These rules not only apply to written records such as business letters and documents but also digital content channels such as social media, text/SMS, audio, video, website, and blogs.

FINRA retention requirements:

1. Books and Records.

The SEA Rules 17a-3 and 17a-4 detail the books and records that broker-dealers and member firms are required to create and retain. Examples of records that should be made and archived are the following:

  • Records of original entry
  • Asset and Liability Ledgers, Income Ledges, Customer Account Ledgers
  • Trade tickets
  • Copies of confirmations and notices
  • Records of puts, calls, spreads, and proof of money balances
  • Customer account profile information
  • Corporate documents, trial balances, written agreements
  • Compliance, supervisory, and procedures manuals.
  • Originals of all communications received by broker-dealers relating to its business.
  • Copies of all communications sent by broker-dealers relating to its business.

For more detailed information about the list of books and records that broker-dealers must make and preserve, you can visit the website of Electronic Code of Federal Regulations (e-CFR) where you will find granular information about SEA rules 17a-3 and 17a-4.

2. Default Retention Period

Periods for required books and records vary depending on the type. For instance, trade tickets for brokerage orders are required to be preserved for at least three years, while originals of all business-related communications received, and copies of all communications sent by broker-dealer should be retained for at least three years.

Otherwise, records that do not have specified period of retention indicated in the SEA Rule 17a-4 have a default 6-year retention period. You can check this Broker-Dealer Record Retention Checklist to know the retention period for each type of book and record.

3.Recordkeeping formats and compliance requirements

The recordkeeping, as stated in SEA Rule 17a-4 may be in one of the three formats:

  • Paper
  • Micrographic media
  • Electronic storage media (ESM)

Books and records may also be converted from one permissible format to another. For instance, an original paper document may be converted into an electronic record for retention on ESM, given that the firm has a verified conversion process in place to ensure that the electronic copy is accurate, complete, and readable.

The SEA Rule 17a-4 also sets specific conditions applicable to ESM. Firms are encouraged to invest in an archiving platform that will enable them to meet five conditions of a compliant archiving practice:

  • Immutability – The final version of the electronic records must be written to unchangeable archive storage such as a WORM (write once, read many) drives.
  • Discoverability – The archive must be indexed in a way that makes it fully searchable by the metadata and key attributes so that any information can be easily retrieved and reviewed.
  • Auditability – Every event that occurs – from the first writing of data to the moment it is destroyed – should be logged and recorded.
  • Retainability – The platform should be able to retain different records for different periods.
  • Destructibility – The record-retention policies should detail the method of destruction and how many times the platform would be overwritten to eradicate any trace of data.

To ensure that your company complies with the basic recordkeeping requirements set by Rule 4511, your archiving technology should be able to satisfy the above-conditions for compliant archiving practice. TeleMessage offers our Mobile Archiver that can help financial services leaders to efficiently capture and retain electronic data and content including enterprise SMS, emails, and web and social media content, concerning compliance with the archiving requirements of FINRA and SEC. Our archiving solution is equipped with versioning, and robust governance capabilities, ensuring content compliance across all digital channels in order to meet global regulatory requirements.

Contact us today to learn more about our enterprise messaging solutions.

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