A client, Mr. Davis, approaches his investment adviser representative (IAR) seeking to obtain copies of all correspondence, account statements, and trade confirmations related to his account over the past five years. The IAR informs Mr. Davis that some records are no longer available because they were purged after three years in accordance with the firm's internal policy. Under the Uniform Securities Act (USA), how should the IAR have responded?
- AThe IAR should have informed Mr. Davis that he could only access records from the last two years, which must be readily accessible.
- BThe IAR's response is acceptable, as firms are only required to retain records for three years.
- CThe IAR should have provided all requested records, as the USA generally requires investment advisers to retain records for five years.
- DThe IAR should have provided records for the past three years, as that is the federal requirement.
Show answer & explanationAnswer & explanation
Correct answer: C. The IAR should have provided all requested records, as the USA generally requires investment advisers to retain records for five years.
Under the Uniform Securities Act (USA), investment advisers are generally required to preserve records for a period of five years. The first two years of these records must be maintained in an easily accessible location. The firm's internal policy of purging after three years is insufficient and violates the USA's record retention requirements.
Why the other options are wrong
- A. Two years readily accessible is part of the five-year rule, not the total retention period.
- B. This is incorrect; the USA requires a five-year retention period for IAs.
- D. Three years is often a federal requirement for broker-dealers, but for IAs under the USA, it's five years.
IA Record Retention (USA)
Under the Uniform Securities Act (USA), investment advisers must generally retain all required books and records for a period of five years, with the first two years being kept in an easily accessible location.
- Five-year retention period for IAs (USA).
- First two years must be readily accessible.
- Includes correspondence, statements, trade confirmations, etc.
- States can impose stricter requirements.
Memory trick: Five years to keep, two years to find fast.