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SEC CO/AP: Regulatory Framework and Recordkeeping

SEC CO/AP · Work through your exam, one topic at a time.

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Regulatory Framework and Recordkeeping

Domain 8 - Regulatory Framework and Recordkeeping

This domain tests the statutory map - which law governs which activity - and the retention rules that keep a firm's books and records examinable.

The statutory map

  • Securities Act of 1933: registration of new issues, prospectus delivery, exemptions in Section 4(a)(2) and Regulation D, resale limits under Rule 144.
  • Securities Exchange Act of 1934: registration of broker-dealers, periodic reporting, proxy rules, and Rule 10b-5, which reaches insider trading.
  • Investment Company Act of 1940 governs funds; the Investment Advisers Act of 1940 governs advisers and requires Form ADV.
  • FINRA Rules: 3110 (supervision), 2210 (communications), 2010 (conduct), 2020 (manipulative devices), 4530 (fingerprinting).

Records

  • Exchange Act Rules 17a-3 and 17a-4 require books and records for six years, the first two in an easily accessible place. Electronic records must be preserved in a non-rewritable, non-erasable format and be readily producible.
  • FINRA Rule 4511 incorporates the Exchange Act retention periods and adds firm-specific records.
  • Communications with the public are retained for three years; customer complaints for four years.
  • Anti-money-laundering rules require a customer identification program, suspicious activity reports, and currency transaction reports above $10,000.
  • Form U4 is filed within 30 days of association; Form U5 within 30 days of termination; U4 amendments within 30 days of a reportable event.

Worked example

An examiner requests a trade blotter from 30 months ago. Under Rule 17a-4 the record is still inside the six-year window, but the two-year "easily accessible" period has expired; the firm may retrieve it from archived storage yet must still produce it promptly on request.

Traps

  • Assuming all records share a single retention period.
  • Confusing the 1933 Act's offering rules with the 1934 Act's ongoing reporting duties.
  • Forgetting that Rule 10b-5 applies to any person, not only registered representatives.