FINRA Rules for Document Retention: Requirements and Standards

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FINRA stands for Financial Industry Regulatory Authority. While it may at first appearance look as though FINRA is part of the United States federal government, it is not. They are a non-profit, independent organization that is authorized by Congress to protect the American investors.

FINRA is dedicated to the efficient and effective enforcement of regulations in the securities industry in order to protect individual investors and the integrity of the securities market. In basic terms, FINRA exists to ensure fair and honest securities exchanges.

The modes of regulation and enforcement utilized by FINRA include the following:

  • Writing and enforcing governing rules
  • Overseeing over 4,000 securities firms and over 600,000 licensed brokers
  • Examining firms for compliance
  • Educating investors
  • Fostering market transparency

Because FINRA is authorized by Congress to help regulate and monitor securities firms and brokers, they have the ability to conduct investigations, perform audits, and have on-site visits to ensure that investors are receiving honest information and that the integrity of the market is upheld.

Each year FINRA performs the following activities:

  • Review more than 100,000 individual communications and advertisements coming from brokers and firms to investors in addition to evaluating websites and other informational sources
  • Conduct routine examinations and audits
  • Investigate suspicious activity and consumer complaints
  • Discipline, fine, and/or disbar brokers or firms, if rules are broken
  • Refer securities fraud and insider trading cases to the SEC (Securities Exchange Commission)
  • Resolve securities disputes
  • Ensure vital records are maintained for the appropriate time
  • Educate investors using powerful educational tools

Attention should be paid to the rules set about by FINRA—as well as the SEC—as the violation of these rules, whether intentional or out of disorganization or ignorance, carries steep consequences.

Compliance Woes

Many rules and laws regarding the primary and secondary trading of securities were enacted in 1933 and 1934 with the development of the Securities Act and the Securities Exchange Act respectively. These acts protect securities investors, and both acts are monitored by the SEC. The SEC is charged with monitoring and enforcing the United States’ federal securities exchange laws.

On October 26, 2001, the SEC adopted a few amendments under the Securities Exchange Act of 1934 due to the fact that our ability to record and maintain purchase and sale documents, associated person records, customer records, and customer complaint records—among others—has increased in the 7 or so decades since the origination of the act in 1934. As a result, there are many new documentation requirements for firms and brokers within the securities financial realm.

FINRA rules for document retention have the ability to cause great compliance woes for brokers and firms. Many honest and upstanding securities firms may fall out of compliance because of the sheer magnitude of keeping track and proper and timely disposal of records. Even if a firm feels as though they have a handle on the rules and regulations, human-imposed errors can make an audit extremely stressful.

FINRA Document Retention Policies

One of the biggest challenges of our day and age is to safeguard personal and confidential information. We hear of credit card data breaches, scam alerts, and identity theft on a daily basis. Within the securities industry, the charge to safeguard the storage and sharing of clients’ confidential information is one that should not be taken lightly. Besides the associated moral obligation, each broker and firm has a legal responsibility to safely and securely store the required records of each client.

For example, FINRA has designated specific document retention policies within the securities industry facet of broker-dealers books and records, and they include the following categories and the time requirement for each:

  • Memoranda of brokerage orders and dealer transactions: 3 years, the first 2 in an easily accessible place
  • Associated person location and identification number records: 3 years after the associated person has terminated employment and all other connections with the firm
  • Associated person compensation records: 3 years, the first 2 in an easily accessible place
  • Associated person complaint records: 3 years, the first 2 in an easily accessible place
  • Customer account records: 6 years with various furnishing requirement and additional rules and exemptions
  • Communication supervision records: 3 years, the first 2 in an easily accessible place
  • Contact person records: 6 years, the first 2 in an easily accessible place
  • Responsible principal records: 6 years, the first 2 in an easily accessible place
  • Office records: The most recent 2 years
  • Communications with the public: 3 years, the first 2 in an easily accessible place.
  • Organizational documents: Life of the enterprise and of any successor enterprise
  • Special reports: 3 years after the date of the report
  • Compliance, supervisory, and procedures manuals: 3 years after the termination of use of manual
  • Exception reports: 18 months after the date the report was generated

As you can see, and probably well know, the requirements are detailed and records retention rules vary in regards to the amount of time that retention is needed. Additionally, there are rules about properly disposing of records promptly, so the solution to keep everything forever simply won’t cut it either.

Document Management Standards

The rules, regulations, and compliance standards associated with document retention within FINRA are there to protect all investors and create stability and transparency for brokers and firms. The hassle of keeping the necessary information in order and within time constraints specified can be altogether eliminated by using an electronic document management system that is FINRA compliant.

eFileCabinet offers the industry’s best document management software (DMS) for those working to satisfy FINRA rules and regulations. Our DMS provides stellar security features, user-friendly workflow options, frequent backups, and audit trails to make FINRA officers smile. In addition to the headache-free compliance offered by eFileCabinet DMS, you will also find that your firm saves time, space, and money by utilizing our products.

Document Retention Features

Just a few of the features associated with DMS from eFileCabinet include the following:

  • Automatic time stamp and set compliance retention for a particular document category
  • Automatic document deletion when the necessary retention time is completed
  • State-of-the-art security features
  • Document accessibility so the right person can easily access the right document when needed
  • Secure and industry-compliant transfer of materials

As you can see, your firm will greatly benefit from taking advantage of a FINRA-compliant DMS. Don’t wait another day to lift the stress of document retention, fill out the contact form on this page and see how eFileCabinet can benefit you.

By | 2016-12-15T11:59:47+00:00 October 2nd, 2015|
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