For brokers and wealth management firms, record keeping is more than just holding onto old forms. It demands a comprehensive system to maintain, store, and organize the required documents to stay in compliance.
Unfortunately, there are hundreds of ways record keeping can become a broker’s compliance downfall.
Here are four common record keeping pitfalls and how to avoid them.
1) Not Maintaining a Comprehensive Set of Records
Financial planning and broker dealer record keeping is more than saving copies of contracts, trades, and bank statements. SEC Rule 17a-4 specifies the manner and length of time that the records created and produced by broker-dealers, must be maintained, and produced promptly to SEC examiners. To comply with FINRA and the SEC, brokers and firms of all sizes must keep a comprehensive set of records, including employment applications, website copy, trade confirmations, and asset and liability ledgers. Failing to retain even one type of record can put a broker out of compliance and lead to serious fines and punishments. [1]
But keeping track of all those documents can be daunting. Because they must keep copies of nearly every type of document and correspondence, many brokers get overwhelmed and fail to stay in compliance across the board.
2) Using Disconnected Data Storage Tools
Keeping records isn’t just to check a compliance box but to have the correct documents accessible when needed. Under Books and Records, documents must be easily accessible for the first two years. But too often, brokers and firms use different systems for different types of recordkeeping. They may archive client emails within their email system, back signed contracts to the cloud, and keep paper copies of client intake forms or marketing materials.
Although these formats technically all keep the records in compliance, it can create a headache when the firm is audited and has to track down a wide variety of documents or if a client has an issue and the broker needs to locate the corresponding paperwork. When documents are stored in various formats on disconnected systems, finding even a simple email or signature takes up valuable time that could be put to better use serving clients or securing deals. Even worse, if a firm can’t find the correct document on its various systems, it could be held out of compliance even if it does have the right form but just can’t find it.
3) Not Holding On to Records Long Enough
Even brokers who hold onto the correct records often don’t keep the files for the right amount of time. According to the SEC’s Books and Records rule, brokers must keep the originals of all communication received and copies of all communication sent for at least three years — including bank statements, bills, and other business documents. The length of time records must be kept ranges from three years to 22, depending on the type of record.
Getting rid of documents too soon or not holding onto records for the required amount of time can lead to compliance issues.
4) Using an Outdated Record Keeping System
The record keeping rules brokers and firms must follow change regularly. But brokers who don’t stay up to date with changes risk following outdated practices and not being in compliance.
Effective Data and records management isn’t a one-time thing. As technology changes, the SEC and FINRA have updated what type of records need to be kept (such as adding the requirement to maintain social media posts) and updated requirements for electronic record keeping in SEC Rule 17a-4 (f). Staying in compliance requires staying up to date with the changes and regularly updating the firm’s data management system to ensure it is holding on to the proper records and following the current version of the rules.
The best way to solve these common mistakes is with an integrated data management system like Docupace. These systems automate data storage to ensure the correct forms are kept for the appropriate amount of time and in the proper format. And because integrated systems connect all the tools used within the firm, everything from bank statements to social media posts and client emails is kept in one cloud-based location that is easy to search. The answer to all your record keeping headaches is simple: Docupace’s integrated document management solution.
For more information about Docupace and a demo of how it can transform your firm’s recordkeeping, contact us.
