On December 5, 2011, new FINRA rules regarding books and records took effect. These changes affect recordkeeping time limits, customer account information, customer complaints, order information and arbitration agreements.
Recordkeeping – the default time limit for keeping records is six years. This means that if FINRA requires a firm to keep a record but does not specify how long the record must be kept, it must be kept for six years. If a change is made to an account and documentation is required to make that change, the documentation must be preserved for six years after the change. If the account is closed, the firm must maintain the most current information about the account for six years after the account closes.
Account information – When opening an account, the signature of the registered representative opening the account is no longer needed. Instead, FINRA requires the signatures of all persons who are responsible for the account. Additionally, discretionary accounts no longer require the age of the person with discretionary authorization. Instead, an acknowledgment that said person is over 18-years-old, without a specific age, is sufficient.
Customer complaints – Firms must now keep records of customer complaints for four years, not three.
Order information – Previously, firms were allowed to accept block orders from an investment adviser for customer accounts if the firm received the specific account names and designations by the end of the business day. Now, firms are allowed to accept orders from an investment adviser for customer accounts if the order involves more than one customer and the firm receives the specific account names and designations by noon of the next business day.
Pre-dispute arbitration agreements – The disclosure language for pre-dispute arbitration agreements has been updated to include that arbitrators are required to explain their decision in eligible cases if all parties involved file a joint request 20 days before the first scheduled hearing date.
To read Regulatory Notice 11-19 where FINRA outlines these changes in more detail, please click here. Additionally, we have included a summary of these changes on our Exam Updates page, where we include updates to the exams on a regular basis. You may want to brush up on these rules if you’re taking the Series 7, 6, 24, 26, 62, 99 and 79!