CFA Level IEthical and Professional StandardsMedium
An investment adviser operates in a country whose securities law requires firms to retain client records for only three years. Under CFA Institute Standard V(C), Record Retention, what is the minimum period the adviser should retain those records?
- AFive years, per the standard industry practice
- BIndefinitely, because Standard V(C) requires permanent retention of all client records
- CThree years, following the stricter local legal requirement
- DSeven years, the CFA Institute recommended minimum absent a longer applicable law or firm policy
Show answer & explanationAnswer & explanation
Correct answer: D. Seven years, the CFA Institute recommended minimum absent a longer applicable law or firm policy
Standard V(C) recommends that, in the absence of a governing law or regulation requiring a longer period, members retain records for a minimum of seven years. Since local law requires only three years (less than the CFA Institute recommendation), the firm should follow the stricter seven-year guidance.
Why the other options are wrong
- A. Five years is not the standard used by CFA Institute guidance.
- B. Standard V(C) does not require indefinite retention.
- C. Members should follow whichever requirement is stricter/longer, not the shorter local law.
Record Retention (V(C))
Members must maintain records supporting investment analyses, recommendations, and communications with clients to substantiate compliance with the Code and Standards, retaining them for a minimum of seven years absent a longer legal or firm requirement.
- Seven years is the CFA Institute default minimum
- If law requires longer, follow the law
- Records support defensibility of research and recommendations
Memory trick: When in doubt, keep it seven years about.