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Series 27 - Recordkeeping and Reporting

Study materials for FINRA Series 27 Exam
STUDY
PLAY
Records: SEC Rule 17a-3
Every B/D must make and keep current specified books and records relating to its business
Records: Retention Time Categories
3 years
6 Years
Lifetime
Records: Accessibility
First 2 years - Easily Accessible
After 2 years - Microfilm/fiche, Computer, Outside Vendor
Records: Lifetime
1) Formation Docs: Partnership or C-Corp
2) Stock Certificates
3) Minutes
4) Form B/D (and amendments)
5) SRO Registrations
Records: 6 Years
1) Blotters
2) General ledgers
3) Stock Records
4) Customer Ledgers
5) Customer Account Records
Records: General Ledger
Definition: Accounting Records
Kept for: 6 Years
Deadline: Posted monthly, 10 bdays from monthend
Records: Stock Record
Definition: Securities Accounting System for each security
Kept for: 6 Years
Deadline: Posted monthly, 10 bdays from monthend
Note: Long Side = Who Owns It, Short = Location
Records: Customer Ledger
Definition: Lists all cash & margin accounts seperately
Kept for: 6 Years
Deadline: by Settlement Date
Records: Customer Account
Definition: New Account Forms
Kept for: 6 Years after closure
Deadline: ??
Records: Principal Designation
6 years
Records: SIPC Assessment Form
6 Years
Records: Customer Complaints
FINRA - 3 Years
MSRB - 6 Years
Records: Order Memorandums
Definition: Order or Trade Ticket
Kept for: 3 Years
Deadline: Next biz day
Notes: Identity, Discretionary Power, Solicit, Date and Time required
Records: Customer Confirmations
Definition: Customer Confirmation
Kept for: 3 Years
Deadline: by Settlement Date
Records: Transfer Record
Definition: List of all securities sent to transfer agent
Kept for: 3 Years
Deadline: 2nd Biz day after Transfer
Notes: Numbers, Registered Holders, New Name, Dates required
Records: Dividends & Interest Received
Definition: Record of all dividends and bond interest received
Kept for: 3 Years
Deadline: 2 Biz days after receipt
Records: Stock Borrowed & Loaned
Definition: All borrowings from other B/Ds
Kept for: 3 Years
Deadline: 2 Biz days after activity
Records: Cash Borrowed & Loaned
Definition: All cash borrowings from lenders
Kept for: 3 Years
Deadline: 2 Biz days after activity
Records: Fails to Deliver (Receive)
Definition: Includes date, contract amount and MV
Kept for: 3 Years
Deadline: 2 Biz days past settlement
Records: Break in Stock Record
Definition: Physical Count differs
Kept for: 3 Years
Deadline: 7 Biz days after discovery
Records: Customer Correspondence
Definition: All written communication
Kept for: 3 Years
Deadline: None
Records: Discretionary Agreements and POA
Definition: Discretionary Agreements & POAs
Kept for: 3 Years
Deadline: after account closure
Records: Record of Benificial Owner
Definition: Names and identities of All Customers
Kept for: 3 Years
Deadline: None
Notes: Street name must carry notation on customer authorization to disclose identity
Records: Proof of Ledger
3 Years
Records: Employee Questionnaire
Definition: Name & Key Info, 10 Yr Work History and SRO Actions
Kept for: 3 Years
Deadline: after termination
Records: Fingerprints
Definition: SEC Rule 17f-2 for RPs, Handlers, Book Handlers and Supervisors of above
Kept for: 3 Years
Deadline: after termination
Records: FOCUS Support (1/3)
1) Customer (non) money balance
2) Proprietary positions
3) Secure Demand Note Amounts and Collateral
4) Commodity Futures Contract Descriptions
Records: FOCUS Support (2/3)
5) Lists of Options Positions
6) Undue Concentration Securities
7) Joint Account Positions with B/D Interest
8) Description of Fails to Deliver charged to Net Cap
Records: FOCUS Support (3/3)
9) Possession/Control Item Documentation
10) Net Cap Computation Charges for Others Items Charged or Credited
11) Num of Registered Reps (RPs) and Trade Tics
Records: Miscellaneous 3 Year Records
- Banking Documents
- Bills and Invoices
- Business Communication Records
- Financial Statements
- Option Trades
- Trial Balance Wrkshts
- Reserve Calcs
- Net Cap Wrkshts
- AI Wrkshts
Records: Omnibus Clearing & Introducing
Clearing and Firm A must prepare blotters, records and ledgers
Records: 5 Year Retention
Customer Identity Records, Currency Transaction (Form 104) and Suspicious Activity Reports
Reporting: FOCUS - Definition
- Filed with FINRA and SEC
- Types II and I
Reporting: FOCUS - Type II
- Required for Clearing and Carrying Account B/Ds
- Due 17 bdays days after end of calendar month & quarter
- 5th FOCUS filed17 bdays after financial statement date (if not year end)
Reporting: FOCUS - Type IIa
- Required for Non-Clearing or Carrying B/Ds
- Due 17 biz days after end of calendar quarter
- 5th FOCUS filed17 biz days after financial statement date (if not year end)
Reporting: FOCUS - Type IIa Abbreviated
- Must be filed by fully disclosed firms considered dealers for net cap purposes
Reporting: Violation & Early Warning Reports
Notify SEC if:
1) Net Cap drops below minimum (same day notify)
2) AI exceeds 15:1 (8:1 in year 1)
3) Sub Debt to Total Capital Exceeds 70pct +90 days
Reporting: Accounting System Material Inadequacy
1) discovered by independent accountant
2) Notify DEA and SEC within 24 hours of event (phone/fax)
3) Transmit report within 48 hours (delivery)
Reporting: Books Not Current
1) discovered by B/D
2) Notify DEA and SEC same day (phone/fax)
3) Transmit report within 48 hours (delivery)
Supplemental Reporting: Membership Termination
File FOCUS within 2 biz days of event
Supplemental Reporting: Financials Sent to Customers
- Sent 2x/year, 1 incls audited stmts
- Audited stmts sent by 105 days post year-end
- Include: BS, Required & Computed Net Cap, Material Findings on Records, Offer to Inspect
- Unaudited BS and Net Cap sent 65 days from midpoint
Supplemental Reporting: Financials Sent to Customers (Exemptions)
1) Fully Disclosed B/Ds and Inv Co Shares Exempt
Supplemental Reporting: SEC Annual Audited Report
1) Audited FOCUS required for DEA and SEC
2) Deadline: 60 days of date of audited financial stmts
3) Includes: BS, IS, Equity, Sub Debt, Net Cap & Reserve Comps
Supplemental Reporting: Annual Filing Extension
1) 30 day extension may be granted with reasonable basis
2) Need: time requested, why late, steps to cure timing issues
Supplemental Reporting: Accountants
1) Independent, Good Standing
2) Terminations - Must be filed within 15 days with SEC & FINRA
3) Audit Objs - System, Controls, Safeguards, NC/AI and Box Ct Procedures, Reg T and Customer Protection Rule Compliance
Securities Information Center: Reporting Missing Securities
- SIC keeps records
- 2 Biz days to locate upon discovery, 1 day to report missing
- Delivered through Clearing: 1 biz day of notice
- Securities count: 10 biz days
- Transit: 2 biz days of non-receipt
Securities Information Center: Reporting Stolen Securities
- 1 day to report to SEC and Transfer Agent (discovery)
- FBI upon discovery of theft
- Recovery 1 biz day
Securities Information Center: Securities Inquiries
Required to Report to SIC if security comes to possession reported missing, lost counterfeit or stolen
Securities Information Center: Securities Inquiries - Exceptions
- Security Received from Issuer
- Received from Institution Required to Report
- Transaction less $10,000
- Received from Existing Cust, for Cust and sold to that Cust
Securities Information Center: Securities Inquiries - Exemptions
- Registered US Govs or Agency paper
- Securities with No CUSIPS
- Bond Coupons
Securities Information Center: Always Report
1) Cust delivers secs in street name
2) New cust deposits secs in registered or bearer form
3) Existing cust delivers secs in bearer form and original purchase is not available
Money Laundering: Basics
1) Detection procedures reqrd per FINRA 3310 & MSRB G-41
2) Report any single day currency gtr $10,000 (FinCEN 104)
3) Failure to report = $500K fine and/or 10 years prison
4) Form 4789 filed w/i 15 days of currency receipt
Money Laundering: The Patriot Act
B/Ds required to:
1) Implement Policies to Detect & Report Suspicous Activity
2) Designate an individual at the firm responsible for implementation
3) Provide ongoing training for firm personnel
4) SAR filing
Member Activity Restrictions: Triggers
Limitations placed if following exist for 15+ consecutive biz days:
1) Net Cap less 150pct of Min Requirement
2) AI:NC gtr 10:1
3) Net Cap less 5pct of Agg Debits
Member Activity Restrictions: Responses
1) Pay free credit customer balances
2) make delivery on all fully paid positions
3) Reduce inventory
4) No new customers
5) Restrict Salaries
6) Accept Unsolicited Orders (only)
7) File special reports
8) Postpone Opening/Close Branches