Broker-Dealer Guide


All broker-dealers are required to create and maintain certain records relating to their brokerage business and accounts.

A broker-dealer is required to make and keep all account documents, correspondence, memoranda, papers, books and other records which are required under the Rule 17a-3 and 17a-4​​ of the Securities and Exchange Act of 1934. The Division of Securities has adopted these books and records requirements by reference in Wis. Admin. Code s. DFI-Sec 4.03(3). Following is a list of the home office books and records that broker-dealers are required to keep:

* A record showing all purchases and sales, receipts and deliveries of securities (including certificate numbers), receipts and disbursements of cash and all other debits and credits. Each record should include the account for which the transaction was made, the name and amount of the security, the purchase or sale price, the trade date, and the name of the person who either purchased, received, sold or delivered the security. (17a-3a1)

* A ledger (or other records) reflecting all assets and liabilities, income and expense and capital accounts. (17a-3a2)

* Ledger accounts (or other records), itemizing separately as to each cash and margin account all purchases, sales, receipts and deliveries of securities and commodities for the account and all other debits and credits to the account. (17a-3a3)

Ledgers (or other records) reflecting the following: securities in transfer, dividends and interest received, securities borrowed and loaned, moneys borrowed and loaned (together with a record of the collateral), and securities failed to receive and deliver. (17a-3a4)

* A securities record or ledger showing separately for each security as of the clearance dates, all "long" or "short" positions (including securities in safekeeping) carried by the broker-dealer for its account or for the account of its customers or partners, and showing the location of all securities long and the offsetting position to all securities short, and in all cases the name or designation of the account in which each position is carried. (17a-3a5)

An order memorandum/ticket for every order or instruction given or received for the purchase or sale of securities, whether executed or not. The memorandum/ticket shall include: the terms and conditions of the order, and any modification or cancellation, the account for which it was entered, the time the order was received from the customer, the time of entry, the execution price, the identity of the agent responsible for the account, the identity of the person who excepted the order on behalf of the customer if not the agent responsible for the account, if the customer entered the order electronically, a notation to that effect, and to the extent feasible, the time of execution or cancellation and a notation if it was a discretionary trade. If the security is purchased by subscription directly from the issuer, a copy of the subscription initiating the purchase must be kept. (17a-3a6)

An order memorandum/ticket for every purchase or sale for the account of the broker-dealer to show the price, and to the extent feasible, the time of execution. If the purchase or sale is with a customer other than another broker-dealer, the memorandum/ticket shall also show: the time of receipt, the terms and conditions of the order and any modification thereof, the account for which it was entered, the identity of the associated person if any who was responsible for the account, and the identity of any other person who entered or accepted the order, or if the order was entered electronically, a notation to that effect. (17a-3a7)

Copies of all confirmations of all purchases and sales of securities, including all repurchase and reverse repurchase agreements and copies of notices of all other debits and credits for securities, cash and other items for the account of the customer and partners of the broker-dealer. (17a-3a8)

For each cash and margin account established and maintained with the broker-dealer, information setting forth the name and address of the beneficial owner of each account, and copies of all guarantees of accounts and all margin, lending and option agreements. In the case of joint, partnership and corporate accounts, persons authorized to transact business for the account must execute the records required by this paragraph. (17a-3a9)

For each "associated person" (registered agent), an application for employment which has been approved in writing by the authorized representative of the broker-dealer. The application must contain at least all of the information required by Form U4. (17a-3a12(i))

A record listing every associated person of the broker-dealer which shows the office or offices where the associated person regularly conducts business, their Central Registration Depository number and every internal identification number or code assigned to that person. (17a-3a12(ii))

For each account with a natural person, the broker-dealer must keep a new account form, which contains at least the following: the customer's name, tax identification number, address, telephone number, date of birth, employment status (including occupation and whether the customer is an associated person of the broker-dealer), annual income, net worth (excluding value of primary residence), and the account's investment objectives. In the case of a joint account, it must include personal information for each joint owner who is a natural person. The financial information for the individual owners may be combined. The new account form shall also indicate whether it has been signed by the associated person responsible for the account and approved or accepted by a principal of the broker-dealer. The broker-dealer shall be excused from obtaining information required above if the customer neglects, refuses or is unable to provide it. (17a-3a17)

The broker-dealer must keep a record showing that it has furnished a completed copy of the above information to each customer within 30 days of opening the account and thereafter, every 36 months. The broker-dealer may elect to send this notification with the next statement mailed to the customer after the opening of the account. The broker-dealer may also choose to exclude personal information such as tax identification number and date of birth.

The information provided to the customer shall include an explanation of terms regarding investment objectives. The new account form or alternate document should also be accompanied by a prominent statement directing the customer or owner to mark any corrections and return the document to the broker-dealer, as well as notify the broker-dealer of any future changes to information contained in the account record.

Every time the name or address of the customer is changed on the new account form, the broker-dealer shall furnish a notification of that change to the customer's old address or to each joint owner and the associated person responsible for the account within 30 days of receiving notice of the change.

Every time the investment objectives change, the broker-dealer shall provide a copy of the updated new account form or alternate document to the customer as well as the associated person responsible for the account within 30 days of the notice of change.

The record requirement as well as the delivery requirement above shall only apply to accounts for which the broker-dealer has within 36 months made a suitability determination. This does not supersede any other rules pertaining to information collection from customers required by a self-regulatory organization.

If an account is discretionary, the broker-dealer must maintain copies of all signed documents allowing such activity.

A record indicating that each customer received a copy of each written agreement entered into by the customer.

A complaint record for each associated person to contain: the complainant's name, address, account number, the date the complaint was received, the name of any other associated person identified in the complaint, a description of the nature of the complaint and the disposition of the complaint. Alternatively, a copy of the original complaint along with the disposition may be kept by the firm in a separate file identified by the associated person named in the complaint. (17a-3a18)

Commission records for each associated person to include all monetary and non-monetary compensation. The broker-dealer does not have to keep a physical copy of the record as long as it can be produced at the request of a securities regulator. Also, all compensation agreements between the broker-dealer and the associated person, including commission schedules, and method by which compensation is determined, should be kept. (17a-3a19)

A file containing all advertisements and sales literature. (17a-3a20)

* The broker-dealer shall have one person designated to explain the records that the firm maintains. The person must be listed by name or title. (17a-3a21)

* A record listing each principal responsible for establishing and ensuring compliance with broker-dealer policies and procedures. (17a-3a22)

All check books, bank statements, cancelled checks and cash reconciliations. (17a-4b2)

All bills receivable or payable (or copies thereof), paid or unpaid, relating to the business of the broker-dealer. (17a-4b3)

Originals of all communications received and copies of all communications sent (including inter-office memoranda and communications). (17a-4b4)

All trial balances, computations of aggregate indebtedness and net capital, financial statements, branch office reconciliations, and internal audit working papers, relating to the business of the broker-dealer. (17a-4b5)

All guarantees of accounts and all powers of attorney and other evidence of the granting of any discretionary authority given in respect to any account, and copies of resolutions empowering an agent to act on behalf of a corporation. (17a-4b6)

All written agreements (or copies thereof) entered into by the broker-dealer relating to its business, including agreements with respect to any account. (17a-4b7)

All partnership agreements, or all articles of incorporation, by-laws, minute books and stock certificate books. (17a-4d)

The required books and records above that are marked by * must be preserved for a period of not less than six years, the first two years in an easily accessible place. After an account has closed, the broker-dealer must retain the records relating to customer account cards or records which relate to the terms and conditions with respect to the opening and maintenance of the account for a period of not less than six years after the closing of the account. All partnership articles, or in the case of a corporation, all articles of incorporation or charter, minute books and stock certificate books, Form BD and Form BDW shall be preserved during the life of the enterprise and of the successor enterprise. All associated persons' employment records shall be preserved until at least three years after the associated person's employment with the broker-dealer has terminated. All compliance, supervisory, and procedures manuals, including updates, shall be preserved until three years after the termination of use of the manual. All reports produced to review for unusual activity in customer accounts shall be preserved until 18 months after the date the report was generated. All other records listed above shall be preserved for a period of not less than three years with the first two in an easily accessible place. The record may be retained by computer if a printed copy of the record can be prepared immediately upon request. In the event a record has been preserved for two years, an electronic copy may be substituted for the remainder of the required period so long as copies can be produced "immediately upon request."

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