Compliance Solutions for Investment Advisers

Keeping Trade Confirmations

Recently an adviser asked if they still needed to keep trade confirmations since they were retained by their broker-dealer/custodian.

I think an adviser must retain them in their books and records for three reasons:

1.  The repository at the BD is the BD’s books and records and not the advisers.  Therefore, the adviser is technically not meeting the requirement of Rule 204-2 if they rely on BD’s books and records as a proxy for their own.

2.  Aside from (1) above, some custodians only keep records for certain periods and even those may have varying degrees of accessibility (e.g., online copies available for 6 months and then hard-copy only back X years was a standard policy not too long ago).  This is further exacerbated by the fact that the custodian can change their retention policies (within the restrictions of BD books and records requirements) without notice to the adviser.

3.  Aside from (1) and (2) above, if for whatever reason the BD’s repository is not available at the time of inspection (i.e., records systems go down a lot more than folks realize), the adviser will not likely get a pass from the regulator by saying “Well I rely on the BD for my books and records, and their system is down.”

 

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