Risk Assessment Recordkeeping Requirements
You can’t be a broker-dealer without it. Here’s a list of the many documents a broker-dealer is required to keep in order to be clear about its financial and operating risks. All of these documents must be kept for at least three years and in an easily accessible place.
Organizational chart. A firm’s “org chart” (as it is known in the vernacular) must include the broker-dealer and all its associated persons; all material associated persons must be designated as such.
Written policies and procedures. These must describe how a broker-dealer will monitor and control the financial and operational risk arising from the activities of any of its material associated persons. They must, for instance, indicate where the broker-dealer gets its funding (including any potential alternative sources that might become necessary) and go into detail about the liquidity of its material assets and the structure of its debt capital (i.e., capital raised through a loan).
The policies and procedures must also track the broker-dealer’s trading positions and risks. Its books and records must indicate the reporting responsibilities for its trading activities and its policies toward imposing trading restrictions on securities and financial instruments. Finally, the policies must describe the types of reviews the firm conducts to monitor existing positions, as well as trading limitations and restrictions.
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