For broker-dealers and RIA member firms in the securities industry, navigating compliance with electronic books and records rules and federal securities laws requires meticulous attention to detail – a point starkly illustrated by the SEC’s September 2024 enforcement actions resulting in over $88 million in penalties against 12 firms for recordkeeping failures.
Under Securities Exchange Act Rules 17a-3 and 17a-4, along with FINRA Rule 4511, registered representatives must adhere to stringent electronic books and records rules. Here’s a focused guide to ensuring your firm meets these regulatory obligations during client onboarding and advisor transitions.
Implement a Comprehensive Electronic Recordkeeping System for Onboarding
FINRA and applicable Exchange Act rules require broker-dealers and RIAs to maintain an effective electronic recordkeeping system for new accounts and transitions.
To comply, your system should:
- Securely store all new account documentation and transition records as mandated by federal securities laws
- Capture and retain all client authorizations and consents
- Track and document identity verification steps
- Maintain complete electronic records of account transfer documentation
- Maintain electronic records in a non-rewriteable, non-erasable format as specified by applicable securities laws
Establish Clear Data Retention Policies for Client Records
Member firms must comply with specific records rules under FINRA Rule 4511 and Exchange Act requirements for client accounts:
- Set specific retention periods for onboarding documentation (minimum six years for broker-dealer records)
- Maintain complete client account opening histories
- Preserve all transition-related authorizations and communications
- Document customer identity verification records
- Implement write once, read many (WORM) storage for required books and records
Automate New Account Compliance Checks
Add compliance checks that align with account opening requirements:
- Verify customer identity and background checks
- Validate account documentation completeness
- Screen for suspicious activity indicators
- Monitor account transfer timing and documentation
- Generate compliance reports for regulatory examinations
Integrate Systems for Seamless Account Processing
Ensure integrated systems meet federal securities laws while facilitating efficient onboarding:
- Connect CRM, clearing, and account opening systems
- Enable straight-through processing where compliant
- Maintain consistent data across platforms
- Track multi-step processes across systems
- Document system integrations for regulatory review
Streamline Compliant Client Communications
Meet FINRA and applicable Exchange Act books and records rules for onboarding communications:
- Archive all account opening and transfer communications
- Document all client authorizations and consents
- Maintain records of all transition notifications
- Track client response times and follow-ups
- Enable efficient search and retrieval capabilities
Streamlining Compliance with Modern Technology
For RIAs and broker-dealers, meeting these extensive requirements while maintaining efficient onboarding and transition processes can be complex. Modern technology solutions can help firms maintain strong compliance with federal securities laws while improving efficiency and client satisfaction.
The right platform should provide:
- Automated compliance checks integrated into the onboarding workflow
- Complete audit trails of all client interactions and authorizations
- Secure, compliant storage of all account documentation
- Efficient account transfer and transition management
- Real-time visibility into process completion and documentation status
Streamlining Compliance with OnBord
OnBord simplifies these compliance challenges through our specialized wealth management platform featuring:
Built-in Regulatory Compliance:
- Automated compliance checks and verifications aligned with SEC/FINRA requirements
- Complete audit documentation for books and records rules
- Advanced identity verification protecting sensitive data
- Reduced compliance risk exposure through automated protocols
Advanced Security Architecture:
- Multi-factor identity verification for registered representatives
- End-to-end data protection meeting federal securities laws standards
- Secure system integration with existing platforms
- Regular security assessments ensuring ongoing compliance
Technology Integration:
- Compatible with major client relationship management systems (CRMs) and clearing firms
- Real-time data synchronization across platforms
- Single sign-on enabled for secure access
- Consolidated data management meeting applicable Exchange Act rules and FINRA books and records requirements
Our team of compliance and technology specialists works alongside your firm to simplify the process, reduce risk, and create a clear path forward including properly maintaining stored electronic records to ensure recordkeeping requirements are met.
Ready to discuss your firm’s specific compliance needs?
Let’s start a conversation about how we can help you create a more efficient, compliant onboarding process.