|Compliance Exam Materials
A. Records required for all advisers:
- Journals - a record of receipts and
disbursements entered as they occur. This forms the
basis for entries into the Ledger.
- General Ledger - and any auxiliary ledgers or
other comparable records that reflect asset,
liability, reserve, capital, income and expense
accounts. The general ledger contains account sheets
for each item on the balance sheet and income
- Order Memoranda - terms and conditions of every
securities order, any modification or cancellation;
the person who recommended the transaction; person
who placed the order; account for which entered;
date; broker-dealer or bank that executes the order;
designation of discretionary power, if used.
- Bank Records - checkbooks, statements, canceled
checks, cash reconciliations.
- Bills and Statements - all the bills the adviser
receives that relate to the business.
- Trial balances, financial statements and other
financial records, reflecting amounts included in
the account balance of each ledger account in the
- Written communications - all written
communications (including those transmitted
electronically) sent or received by the adviser
relating to its business or involving correspondence
- List of discretionary accounts - identify all
clients for whom the adviser has discretionary
- Powers - copies of all powers granted by clients
to the adviser.
- Written agreements - copy of every agreement the
adviser has entered into.
- Copies of all advertising - radio, TV, printed
ads, letters, anything sent to ten or more persons.
- Advisory representatives personal transactions -
personal securities transactions of persons who work
for the adviser and give investment advice.
- Other advisory transactions - personal
securities transactions of principals of the adviser
whose function is something other than giving
- Records of disclosure statements and dates given
to clients-complete consecutive record of disclosure
documents or statements and a record of the dates
they were provided to clients or prospects.
- Solicitors' disclosure statements - file of
solicitor's disclosure statements and client
acknowledgment of receipt.
- Backup information for performance claims - this
information must be maintained if the adviser makes
any claims regarding performance of client accounts.
- Suitability - customer information forms or
other documents recording information used to
determine suitability of recommendations for each
- Client account statements if sent by the
adviser. Statements should include the following:
a. the funds and
securities in the client’s account,
b. the amount of funds and
securities maintained in the client’s
account at the end of the period,
c. any transactions that
were made during that quarterly statement
- Client billing statements or notice of fee
deduction. Billing statements should include the
a. formula used to
calculate the fee,
b. the amount of assets
under management the fee is based on,
c. the time period covered
by the fee.
- Supervision - written supervisory procedures
designed to prevent and detect violations, including
how the procedures will be implemented.
B. Retention Period - All of the above records are
required to be maintained by the adviser in an easily
accessible place for a period of five years from the end of
the fiscal year during which the last entry was made on the
records. For the first two years, the record must be
maintained in the adviser's principal office. Article of
incorporation, partnership articles, minute books, stock
certificates and the like must be maintained in the
adviser's principal office and must be preserved for at
least three years after the termination of the enterprise.
C. Storage Medium - The required records may be
maintained on paper, film, or electronic media, but the
record must be capable of being made immediately available
to an examiner upon request. Film or electronic files must
be duplicated and the copy stored separately from the basic