Rules & Regulations

SEC Rules

SEC Rule 17a-4 & 17a-3

Records to be made by and preserved by certain exchange members, brokers and dealers.

  • Designated Third Party consultant (D3P) requirement.
  • Letters of Notification and Representation filing requirement.
  • Written, enforceable retention policies.
  • Searchable index of all data stored.
  • Data must be viewable and readily retrievable.
  • Storage of data on WORM (write once read many) electronic media.
  • Offsite storage of data.

SEC Rule 204-2

Books and records to be maintained by investment advisers.

  • Retention requirement for all books and records relating to written communications received and sent by an investment adviser.
  • Details the types books and records an Adviser must make and keep true, current and accurate. Email is specifically identified as a business record in the rule.
  • Applies to Hedge Funds and Private Equity firms under the Dodd-Frank Financial Reform Act.
  • Requires Advisers to arrange and index the records in a way that permits easy location, access, and retrieval.
  • Compels Advisers to promptly furnish to the SEC any records requested, electronic or otherwise.

SEC Rule 15a-6

Chaperoning arrangements for international research.

  • Guidance to foreign Broker-Dealers seeking to operate in compliance with U.S. broker-dealer registration requirements.
  • Requires a U.S. broker/dealer to ‘chaperone’ or review research before it is distributed to U.S. investors.
FINRA Regulations

Books & Records

SEC and FINRA books and records requirements.

  • Books, accounts, records, memoranda, correspondence and other documentation or information that firms have to make and preserve in accordance with the federal securities laws, rules and regulations.
  • Covers what are books and records, Electronic Storage Media, Outsourcing and Electronic Communications.

FINRA Rule 3110 & 3120

Supervision and supervisory control system.

  • Establishes personnel permitted to act as supervisors and those that may perform office inspections.
  • Requirement for review of certain internal communications.
  • Compels obligations to monitor for insider trading, including the duty to conduct internal investigations and report information related to those internal investigations back to FINRA.

FINRA Rules 3220

Influencing or Rewarding Employees of Others

  • Guidance on gifts, gratuities and business entertainment compensation related to the sale of securities.
  • Rule 3220 – Gifts and gratuities
  • Rule 3221 – Non-Cash Compensation
  • Rule 3222 – Business Entertainment

FINRA Rule 3270

Outside Business Activities of Registered Persons.

  • Requirement to capture information, documentation and descriptions of outside business activities.
  • Provides for registered persons to agree annually to limitations on such activities.

FINRA Rule 3280

Private Securities Transactions of an Associated Person.

  • Guidance and description of private transactions, associated persons/roles, and compensation requirements.
  • Written Notice requirement and guidance.

FINRA Regulatory Notice 07-59

Guidance Regarding the Review and Supervision of Electronic Communications

  • Written Policies and Procedures
  • Types of Electronic Communications Requiring Review
  • Identification of the Person(s) Responsible for the Review of Electronic Communications
  • Method of Review for Correspondence
  • Frequency of the Review of Correspondence
  • Documentation of the Review of Correspondence

DOJ Acts

Investment Advisers Act of 1940

Defines the responsibilities and limitations placed on open-end mutual funds, unit investment trusts and closed-end funds that offer investment products to the public

  • Applies to companies that primarily offer, invest or trade in securities.
  • Compels fund registration with the SEC.
  • Requires a board of directors, 75% of whom must be independent.
  • Places limits on investment strategies, such as the use of leverage.
  • Obliges funds to maintain a certain percentage of assets in cash for investors that sell.
  • Requires disclosure to investors of the funds’ structure, financial condition, investment policies and objectives.


Imposes record-keeping, reporting and disclosure requirements on all Investment Advisers, Broker Dealers, and Major Swap Participants.

  • Registered advisers are required to maintain records relating to business activities as mandated by Rule 17a-4 of the Securities Exchange Act and Rule 204-2 of the Investment Advisors Act.
  • Applies confidential reporting requirements which compels virtually all advisers to disclose to the SEC/CFTC their trading and investment positions, practices, and exposures that relate to systemic risks (assets under management, use of leverage including off balance sheet leverage, exposures to particular counter-parties and types of securities, credit risk exposures, calculation policies and side letters).
  • Requires registered entities to provide any other information the SEC/CFTC and the Financial Stability Oversight Council (FSOC), the new systemic risk regulator, deems necessary and appropriate.
CFTC Regulations

CFTC 17 CFR 1.31

Books and records; keeping and inspection.

  • All required books and records shall be kept for a period of five years and shall be readily accessible during the first 2 years of the 5-year period
  • Data must be stored in a digital storage medium that exclusively stores records in a non-rewritable, non-erasable format (WORM- Write-Once-Read-Many)
  • Asserts records management system requirements
  • Sets forth original and duplicate record and associated indexes’ properties and formats
  • Designates third party technical consultant and required letter of representation

The information provided may not be applicable in all situations and should not be acted upon without specific legal advice.