Records, Reporting, and Compliance
What to know
Licensees must maintain accurate transaction records, retain them for the required period, and produce them on demand during an examination or investigation. Know the rules on trust fund records, reconciliation, and reporting obligations to the regulator. Understand that records must be contemporaneous and auditable - a reconstructed record created after a complaint is a red flag.
Traps
- Retention periods are frequently tested; know the specific number of years your jurisdiction requires rather than guessing.
- Trust account reconciliation must be performed on a recurring schedule, not once a year.
- Records must be produced promptly on request; delaying or producing altered records is itself a violation.
- A complaint or investigation does not suspend the duty to keep records - it heightens it.
Rule of thumb
If you cannot reconstruct a transaction from the file alone, the recordkeeping is deficient. The file should tell the whole story without the licensee's memory.
Worked example
An examiner requests trust records for the past three years. The licensee produces bank statements but no ledger showing each client's share. The correct analysis: bank statements alone are insufficient; the licensee failed to maintain client-level trust records and reconciliation, which is a recordkeeping violation independent of whether funds were missing.