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, will be retained for a minimum of five years from the end of the fiscal year in which the record was created. The IA also plans to store these records on a secure, non-rewritable, and non-erasable electronic medium. Which of the following statements is TRUE regarding this policy under the Uniform Securities Act?
- AThe policy aligns with the recordkeeping requirements for state-registered investment advisers under the Uniform Securities Act.
- BElectronic storage on a non-rewritable, non-erasable medium is prohibited; physical storage is required for all essential records.
- CThe five-year retention period is only required for records related to investment advisory contracts, not all client communications.
- DThe retention period should be for the life of the client relationship plus two years, not a fixed five-year period.
Show answer & explanationAnswer & explanation
Correct answer: A. The policy aligns with the recordkeeping requirements for state-registered investment advisers under the Uniform Securities Act.
State-registered investment advisers are generally required to retain most records, including client communications, for a minimum of five years, with the first two years in an easily accessible location. Electronic storage on non-rewritable, non-erasable media (WORM format) is an acceptable method for record retention.
Why the other options are wrong
- B. Electronic storage in a non-rewritable, non-erasable (WORM) format is explicitly permitted and often encouraged for compliance purposes.
- C. The five-year retention period applies broadly to many types of records, including client communications, not just contracts.
- D. The life of the client relationship plus two years is not the standard retention period; five years is the general requirement.
IA Recordkeeping Requirements (State)
State-registered Investment Advisers must retain specific records for prescribed periods to ensure compliance and facilitate regulatory oversight.
- Most records must be kept for five years.
- The first two years of records must be kept in an easily accessible location.
- Electronic storage is permitted if it meets specific requirements (e.g., WORM format).
Memory trick: Keep ALL your IA records, and don't let them worm their way out of compliance!