NASAA Series 65, Uniform Investment Adviser Law ExaminationLaws, Regulations, and Guidelines, including Prohibition on Unethical Business PracticesMedium
A state-registered investment adviser (IA) has established a new policy that all client communications, including emails and instant messages, must be retained for a minimum of five years. This policy also mandates that all records be readily accessible for the first two years. Is this policy compliant with the recordkeeping requirements under the Uniform Securities Act?
- ANo, because federal law requires retention for seven years, not five.
- BYes, this policy aligns with the general recordkeeping requirements for state-registered IAs.
- CYes, but only if the IA also stores all records in an easily retrievable electronic format.
- DNo, because all records must be readily accessible for the entire five-year retention period.
Show answer & explanationAnswer & explanation
Correct answer: B. Yes, this policy aligns with the general recordkeeping requirements for state-registered IAs.
State-registered IAs are generally required to retain most records for a minimum of five years, with the first two years in an easily accessible location. This policy correctly reflects these requirements under the Uniform Securities Act.
Why the other options are wrong
- A. Federal (SEC) requirements can vary, but for state-registered IAs under the USA, five years is standard.
- C. While electronic storage is common and efficient, it's not a condition for compliance with the retention period itself, as other methods are permissible.
- D. Only the first two years are typically required to be 'readily accessible'; the remaining three years can be less immediate.
IA Recordkeeping Requirements (State)
State-registered investment advisers must maintain most business records for a minimum of five years, with the first two years in an easily accessible location.
- 5-year retention period for most records.
- First 2 years must be 'readily accessible'.
- Includes correspondence, transaction records, client agreements, and financial records.
- Specific rules may vary slightly by state, but 5/2 is the general rule.
Memory trick: Five years to keep it, two to retrieve it fast, then the records can slowly fade to past.