Series 10 Study Textbook

Mastering Record keeping Requirements On The Series 10 Exam

One of the keys to passing the Series 10 exam is to make sure that you have a complete understanding of how recordkeeping requirements will be tested on the Series 10 Exam.


Broker Dealer Books and Records

All broker dealers are required to prepare and maintain reports and records according to industry regulations. The content and timing of the reports depends on the nature of the report. SEC Rule 17 a-3 sets forth the requirements for broker dealer reporting, timing, and content. SEC Rule 17 a-4 sets the retention requirements for those records. Records subject to these rules must be maintained anywhere from three years to the life of the firm. Records that are required to be maintained must be readily accessible for the first two years.

Under SEC Rule 17a-3 a significant number of records must be filed and maintained by broker dealers. The following is a list of those records and their definitions:

Blotters

Blotters are records of original entry and must reflect transactions as of the trade date. Blotters must be prepared no later than the following business day, or T + 1. This would include a historical account of all the daily transactions, such as:

  • Purchases and sales of securities
  • Receipts and disbursements of cash
  • Receipts and deliveries of securities

General Ledger

The general ledger reflects the firm's assets, liabilities, income, and expenses and capital accounts. The firm's trial balance and other financial reports can be prepared from this to show the broker dealer's financial condition. It must be prepared monthly.

Customer Accounts

Customer accounts are itemized records of each cash and margin account for each customer. This reflects all purchases, sales, receipts, and deliveries of cash and securities for each customer as well as the new account form and margin agreement, if applicable.

  • These are records prepared from the blotter, including:
  • Securities in transfer — Securities in the process of being transferred into a customer's name.
  • Dividends and interest received — A record of all dividends and interest due to the customer (long), or payable by the customer (short).
  • Securities borrowed and loaned — Records of the broker dealer's borrowing or loaning of securities to complete their transactions.
  • Monies borrowed, monies loaned — This also includes any collateral used in connection with the loan.
  • Securities failed to receive or deliver — These records must show the date due as well as the date received or delivered.

Securities Position Book (Ledger) Stock Record

A securities position book or stock record is a record of the long and short position in each security, whether carried for the account of the broker dealer or for the account of a customer. The location of these securities must also be maintained.

Order Tickets

An order ticket also known as an order memorandum is a record detailing the terms and conditions of an order to purchase or sell a security. Records must be maintained whether or not the order is executed.

Confirmations and Notices

A confirmation is a notice of the terms and conditions of an executed order. Copies of all confirmations and notices of other debits and credits must be maintained.

Monthly Trial Balances and Net Capital Computations

Monthly trial balances and net capital computations serve as a check on the current status and accuracy of the firm's ledger account and financial condition. Firms are required to file their net capital computations with regulators via the FOCUS form.

Employment Applications

A copy of the registration application or U4 form will suffice as an employment application. Applications must be approved in writing by an authorized representative of the member.

Records Required to Be Maintained for Three Years

The following is a list or records that must be maintained by the firm for three years:

  • Advertising
  • Order tickets
  • Confirmations
  • Option records
  • FOCUS reports
  • Monthly trial balances
  • Written customer complaints
  • Subsidiary ledgers
  • Long and short securities differences
  • Compliance and policy and procedure manuals (kept after changes)
  • U4, U5, fingerprints, and employment applications for terminated employees

Records Required to Be Maintained for Six Years

The following is a list of records that must be maintained by the firm for six years:

  • Blotters
  • General ledgers
  • Customer ledgers
  • Customer account records
  • Customer ledgers
  • Stock records / position records

Records Required to Be Maintained for the Life of the Firm

The following records must be maintained for the life of the firm:

  • Articles of incorporation
  • Corporate stock certificate books
  • Minute books from meetings of the board of directors
  • Partnership records
  • Form BD