How Long Does My Broker Have to Retain Records Under FINRA Requirements?
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As reported in InvestmentNews, three Raymond James entities have agreed to pay over $15 million to resolve an investigation by the SEC. The settlement and SEC order focused on Raymond James’s actions in improperly charging certain clients advisory fees when the...read more
Your stockbroker or financial advisor is required to keep many records of what they do with your finances. If you run into disputes with your broker and need to take them to court, to arbitration, or to mediation, these records can help prove what happened, and what should have been done differently. Because of this, the Financial Industry Regulatory Authority (FINRA) writes record retention rules for brokers and advisors. The FINRA arbitration attorneys at Epperson and Greenidge, LLP explain what you should know about FINRA’s record retention rules, and how they may play into your FINRA claim.
SEC and FINRA Record Retention Regulations
Keeping good records is important in the financial industry. The Securities and Exchange Commission (SEC) lists certain documents and records that every registered broker needs to create, keep, and give to investors. Many of these records help clients understand their investments, many protect clients, some protect advisors, and still others simply create good documentation of what happened so there is a solid paper trail. The Securities Exchange Act of 1934 lists how long these documents need to be retained, and who makes and keeps them.
FINRA also has its own rules about keeping records. These rules may require different records than the SEC and may require brokers to keep books and records for even longer periods. Overall, this means that there is no set rule for how long all records must be kept.
In many cases, these records are permitted in either paper, microfiche, or electronic storage. That means that your broker may not have digital records available in every case and may rely on older mediums like paper or microfilm to store transaction records.
These records must have strong supervision, as well. This helps ensure that firms do their best to create the records in the first place, keep the records, turn over any documents to clients, and follow SEC and FINRA procedures for bookkeeping.
What Happens if My Broker Loses My Records?
If your broker breaches their duty to maintain records, they could be committing a serious infraction. Failing to follow FINRA record keeping policies could lead to your broker being disciplined by FINRA, which could even mean losing their license to continue practice as a broker if the violations are serious enough. You may also be entitled to make claims against the broker if their document retention failures caused you financial harm.
The first type of claim may be a breach of contract claim. If your contract with your broker required them to create certain records, give you copies, and retain the originals – or made broad requirements to follow FINRA or SEC rules – your broker may have committed a breach of contract by failing to do so. This could entitle you to make a FINRA claim against them if it caused you harm.
If your broker’s failure to maintain documents hurt your investments, you could be entitled to a financial negligence claim. In these claims, you demonstrate that your broker’s inability to use the proper skill or care when handling your finances lead you to financial harm. This can entitle you to compensation before a FINRA court.
Lastly, the records your broker should have maintained may not always lead to a direct claim for compensation. Instead, it could be grounds for a complaint against then. FINRA maintains records of complaints and investigates whether disciplinary action is required for certain violations. Your broker’s failure to maintain records could justify an official complaint about the financial advisor or stockbroker.
Lastly, the records could come up as part of another claim. If you are pursuing arbitration or mediation in a dispute against your broker, the records they have could be important evidence. If they failed to maintain these records, it may be difficult to prove your case. Fortunately, many rules for records and documents require your broker to give you a copy – meaning you may be able to use your records instead of the broker’s to prove your case.
If your case goes before a court or an arbiter, they may be willing to make rulings on missing records, which can help your case. If one party was in control of a document or piece of evidence, and that evidence goes missing, judges and arbiters may rule that you can assume the evidence cuts against the person who lost or destroyed it. This means that you may be able to use the information in record against your broker, even if they lost or destroyed the record.
FINRA Arbitration Attorneys Representing Investment Fraud Victims
If you or a loved one suffered financial harm because of deceptive brokerage, financial scams, or other underhanded actions from a member of the financial industry, you may be able to file a claim against them. The FINRA claims lawyers at Epperson and Greenidge help investors file for arbitration through FINRA and fight to get compensation they need for their claims. For a free consultation, call our law offices today at (877) 445-9261.