Record keeping, reconciliation and audit trails
What this domain tests
This domain tests whether you can reconstruct what happened, prove compliance, and detect breaks.
Core rules and concepts
The FMC Act and licence conditions require records to be accurate, complete, and retrievable. AML/CFT records must be kept for at least five years after the relationship or transaction; market-services records are generally retained for at least seven years. Records include client instructions, orders, confirmations, statements, marketing, complaints, compliance reviews, and training. Records must be stored securely with access controls.
Reconciliation compares internal records with external sources such as the custodian, bank, registry, or counterparty for cash and financial products. Breaks must be investigated, escalated, and resolved within documented timeframes, with evidence of review. Audit trails must be time-stamped, sequential, and attributable to a user; they should not be editable without a trace.
Worked example
A daily reconciliation shows 100 shares more in the custodian account than in the internal ledger. The dealer should not simply adjust the ledger. The correct process is to identify the cause, such as a missed allocation or duplicate trade, isolate the break, escalate to operations and compliance, correct with authorised entries, and consider client impact and breach reporting.
Traps
Keeping records only in personal mailboxes. Treating reconciliation as a monthly check when client money or assets require daily monitoring. Editing audit logs without a record. Failing to retain phone recordings or emails that evidence instructions.