Texas Administrative Code
Title 7 - BANKING AND SECURITIES
Part 7 - STATE SECURITIES BOARD
Chapter 115 - SECURITIES DEALERS AND AGENTS
Section 115.5 - Minimum Records
Universal Citation: 7 TX Admin Code ยง 115.5
Current through Reg. 49, No. 12; March 22, 2024
(a) Dealer records. Compliance with the record-keeping requirements of the United States Securities and Exchange Commission, found in 17 Code of Federal Regulations §240.17a-3 and §240.17a-4, will satisfy the requirements of this section.
(b) Records to be made by certain dealers. A person or company registered in Texas as a securities dealer shall make and keep current the following minimum records or the equivalent thereof.
(1) Blotters (or other records of
original entry) containing an itemized daily record of all purchases and sales
of securities, all receipts and deliveries of securities (including certificate
numbers), all receipts and disbursements of cash, and other debits and credits.
Such records shall show the account for which each such transaction was
effected, the name and amount of securities, the unit and aggregate purchase or
sale price (if any), the trade date, and the name or other designation of the
person from whom purchased or received or to whom sold or delivered.
(2) Ledgers (or other records) that reflect
all assets and liabilities, income and expense, and capital accounts.
(3) Ledger accounts (or other records)
itemizing separately as to each cash and margin account of every customer and
of such dealer and its partners, all purchases, sales, receipts, and deliveries
of securities and commodities for such account and all other debits and credits
to such account.
(4) Ledgers (or
other records) that reflect the following:
(A) securities in transfer;
(B) dividends and interest
received;
(C) securities borrowed
and securities loaned;
(D) monies
borrowed and monies loaned (together with a record of the collateral therefor
and any substitutions in such collateral); and
(E) securities failed to receive and failed
to deliver.
(5) A
securities record or ledger that reflects separately for each security as of
the clearance dates all "long" or "short" positions (including securities in
safekeeping) carried by such dealer for his or her account or for the account
of his or her customers or partners and showing the location of all securities
long and the offsetting position of all securities short, including long
security count differences and short security count differences classified by
the date of the physical count and verification in which they were discovered,
and in all cases the name or designation of the account in which each position
is carried.
(6) Order memoranda:
(A) A memorandum of each brokerage order and
of any other instruction given or received for the purchase or sale of
securities, whether executed or unexecuted. Such memorandum shall show the
terms and conditions of the order or instructions and of any modifications or
cancellation thereof, the account for which entered, the time the order was
received, the time of entry, the price at which executed, the identity of each
employee, if any, responsible for the account, the identity of any other person
who entered or accepted the order on behalf of the customer or, if a customer
entered the order on an electronic system, a notation of that entry, and, to
the extent feasible, the time of execution or cancellation. The memorandum need
not show the identity of any person, other than the employee responsible for
the account, who may have entered or accepted the order if the order is entered
into an electronic system that generates the memorandum and if that system is
not capable of receiving an entry of the identity of any person other than the
responsible employee; in that circumstance, the dealer shall maintain a
separate record that identifies each other person. Orders entered pursuant to
the exercise of discretionary power by such dealer or any of its employees
shall be so designated. The term "instruction" shall be deemed to include
instructions between partners and employees of a dealer. The term "time of
entry" shall be deemed to mean the time when such dealer transmits the order or
instruction for execution.
(B) This
memorandum need not be made as to a purchase, sale or redemption of a security
on a subscription way basis directly from or to the issuer, if the dealer
maintains a copy of the customer's subscription agreement regarding a purchase,
or a copy of any other document required by the issuer regarding a sale or
redemption.
(7) A
memorandum of each purchase and sale for the account of such dealer showing the
price, and, to the extent feasible, the time of execution; and, in addition,
where such purchase or sale is with a customer other than a dealer, a
memorandum of each order received, showing the time of receipt, the terms and
conditions of the order and of any modification thereof, the account in which
it was entered, the identity of each employee, if any, responsible for the
account, the identity of any other person who entered or accepted the order on
behalf of the customer or, if a customer entered the order on an electronic
system, a notation of that entry. The memorandum need not show the identity of
any person other than the employee responsible for the account who may have
entered the order if the order is entered into an electronic system that
generates the memorandum and if that system is not capable of receiving an
entry of the identity of any person other than the responsible employee; in
that circumstance, the dealer shall maintain a separate record that identifies
each other person. An order with a customer other than a dealer entered
pursuant to the exercise of discretionary authority by the dealer, or agent
thereof, shall be so designated.
(8) Copies of confirmations of all purchases
and sales of securities and copies of notices of all other debits and credits
for securities, cash, and other items for the account of customers and partners
of such dealer.
(9) A record in
respect of each cash and margin account with such dealer containing the name
and address of the beneficial owner of such account and, in the case of a
margin account, the signature of such owner; provided that, in the case of a
joint account or an account of a corporation, such records are required only in
respect of the person or persons authorized to transact business for such
account.
(10) A record of all puts,
calls, spreads, straddles, standby commitments, and other options in which such
dealer has any direct or indirect interest or which such dealer has granted or
guaranteed, containing at least an identification of the security and the
number of units involved.
(11) A
questionnaire or application for employment executed by each partner, officer,
director, agent, trader, manager, and each employee who handles funds or
securities or who solicits transactions or accounts for such dealer, which
questionnaire or application shall be approved in writing by an authorized
representative of such dealer and shall contain at least the following
information with respect to such person (in the case of persons registered with
the State Securities Board, a copy of their application for registration as an
agent, officer, or partner will satisfy this requirement):
(A) name, address, social security number,
and the starting date of employment or other association with the
dealer;
(B) date of
birth;
(C) the educational
institutions attended and whether he or she graduated therefrom;
(D) a complete, consecutive statement of all
business connections for at least the preceding 10 years, including the reason
for leaving each prior employment, and whether the employment was part-time or
full-time;
(E) a record of any
denial, suspension, expulsion, or revocation of membership or registration of
any dealer he or she was associated with in any capacity when such action was
taken;
(F) a record of any denial
of membership or registration, and of any disciplinary action taken, or
sanction imposed, on the person by any federal or state agency, or by any
national securities exchange or national securities association, including any
finding that he or she was a cause of any disciplinary action or had violated
any law;
(G) a record of any
permanent or temporary injunction entered against the person or any dealer he
or she was associated with in any capacity at the time such injunction was
entered;
(H) a record of any arrest
or indictment for any felony or misdemeanor, and the disposition of any such
arrest or indictment or further explanation thereof, and a record of any
conviction for any felony or any misdemeanor, except minor traffic offenses, of
which he or she has been the subject; and
(I) a record of any other name or names he or
she has been known by or has used.
(12) A record listing of every agent of the
dealer that shows, for each agent, every office of the dealer where the agent
regularly conducts the business of handling funds or securities or effecting
any transaction in, or inducing or attempting to induce the purchase or sale of
any security for the dealer, and the Central Registration Depository number, if
any, and every internal identification number or code assigned to that agent by
the dealer.
(13) For each account
with a natural person as a customer or owner:
(A) An account record including the
customer's or owner's name, tax identification number, address, telephone
number, date of birth, employment status (including occupation and whether the
customer is an agent of a dealer), annual income, net worth (excluding value of
primary residence), and the account's investment objectives. In the case of a
joint account, the account record must include personal information for each
joint owner who is a natural person; however, financial information for the
individual joint owners may be combined. The account record shall indicate
whether it has been signed by the agent responsible for the account, if any,
and approved or accepted by a supervisor of the dealer. For accounts in
existence on the effective date of this section, the dealer must obtain this
information within three years of May 2, 2003.
(B) A record indicating that:
(i) The dealer has furnished to each customer
or owner within three years of May 2, 2003, and to each customer or owner who
opened an account after May 2, 2003 within 30 days of the opening of the
account, and thereafter at intervals no greater than 36 months, a copy of the
account record or an alternate document with all information required by
subparagraph (A) of this paragraph. The dealer may elect to send this
notification with the next statement mailed to the customer or owner after the
opening of the account. The dealer may choose to exclude any tax identification
number and date of birth from the account record or alternate document
furnished to the customer or owner. The dealer shall include with the account
record or alternate document provided to each customer or owner an explanation
of any terms regarding investment objectives. The account record or alternate
document furnished to the customer or owner shall include or be accompanied by
prominent statements that the customer or owner should mark any corrections and
return the account record or alternate document to the dealer, and that the
customer or owner should notify the dealer of any future changes to information
contained in the account record.
(ii) For each account record updated to
reflect a change in the name or address of the customer or owner, the dealer
furnished a notification of that change to the customer's old address, or to
each joint owner, and the agent, if any, responsible for that account, on or
before the thirtieth day after the date the dealer received notice of the
change.
(iii) For each change in
the account's investment objectives the dealer has furnished to each customer
or owner, and the agent, if any, responsible for that account a copy of the
updated customer account record or alternative document with all information
required to be furnished by subparagraph (A) of this paragraph on or before the
thirtieth day after the date the dealer received notice of any change, or, if
the account was updated for some reason other than the dealer receiving notice
of a change, after the date the account record was updated. The dealer may
elect to send this notification with the next statement scheduled to be mailed
to the customer or owner.
(C) For purposes of this paragraph, the
neglect, refusal, or inability of a customer or owner to provide or update any
account record information required under subparagraph (A) of this paragraph
shall excuse the dealer from obtaining that required information.
(D) the account record requirements in
subparagraph (A) of this paragraph shall only apply to accounts for which the
dealer is, or has within the past 36 months been, required to make a
suitability determination. Additionally, the furnishing requirement in
subparagraph (B)(i) of this paragraph shall not be applicable to an account for
which, within the last 36 months, the dealer has not been required to make a
suitability determination. Subparagraph (C) of this paragraph does not relieve
a dealer from any regulatory obligation regarding the collection of information
from a customer or owner.
(E) If an
account is a discretionary account, a record containing the dated signature of
each customer or owner granting the authority and the dated signature of each
natural person to whom discretionary authority was granted.
(F) A record for each account indicating that
each customer or owner was furnished with a copy of each written agreement
entered into on or after May 2, 2003 pertaining to that account and that, if
requested by the customer or owner, the customer or owner was furnished with a
fully executed copy of each agreement.
(14) A record:
(A) As to each agent of each written customer
complaint received by the dealer concerning that associated person. The record
shall include the complainant's name, address, and account number; the date the
complaint was received; the name of any other agents identified in the
complaint; a description of the nature of the complaint; and the disposition of
the complaint. Instead of the record, a dealer may maintain a copy of each
original complaint in a separate file by the agent named in the complaint along
with a record of the disposition of the complaint.
(B) Indicating that each customer of the
dealer has been provided with a notice containing the address and telephone
number of the department of the dealer to which any complaints as to the
account may be directed.
(15) A record:
(A) As to each agent listing each purchase
and sale of a security attributable, for compensation purposes, to that agent.
The record shall include the amount of compensation if monetary and a
description of the compensation if non-monetary. In lieu of making this record,
a dealer may elect to produce the required information promptly upon request of
a representative of the Securities Commissioner.
(B) Of all agreements pertaining to the
relationship between each agent and the dealer including a summary of each
agent's compensation arrangement or plan with the dealer, including commission
and concession schedules and, to the extent that compensation is based on
factors other than remuneration per trade, the method by which the compensation
is determined.
(16) A
record, which need not be separate from the advertisements, sales literature,
or communications, documenting that advertisements, sales literature, or any
other communications with the public by a dealer or its agents have been
approved by a supervisor.
(17) A
record for each office listing, by name or title, each person at that office
who, without delay, can explain the types of records the dealer maintains at
that office and the information contained in those records.
(18) A record listing each supervisor of a
dealer responsible for establishing policies and procedures that require
acceptance or approval of a record by a supervisor.
(c) Exemptions from the requirements of subsection (b) of this section:
(1) A dealer
is not required to make or keep such records of transactions cleared for such
dealer by a member of FINRA, the American Stock Exchange, the Boston Stock
Exchange, the Chicago Stock Exchange, the Pacific Stock Exchange, the Chicago
Board Options Exchange, or any other recognized and responsible stock exchange
approved by the Securities Commissioner pursuant to the Texas Securities Act,
§6.F, where such records are customarily made and kept by the clearing
member.
(2) A dealer is not
required to make or keep such records that reflect the sale of United States
Tax Savings Notes, United States Defense Savings Stamps, or United States
Defense Savings Bonds, Series E, F, and G.
(3) A dealer is not required to make or keep
such records with respect to any cash transaction of $100 or less involving
only subscription rights or warrants which by their terms expire within 90 days
after the issuance thereof.
(4) For
purposes of transactions in municipal securities by municipal securities
dealers, compliance with Rule G-8 of the Municipal Securities Rulemaking Board
will be deemed to be in compliance with subsection (b) of this
section.
(d) Maintenance of office records.
(1) Every dealer shall
make and keep current, as to each office, the books and records described in
paragraphs (1), (6), (7), (11), (13), (14)(A), (15), (16), (17), and (18) of
subsection (b) of this section.
(2)
When used in this section, the term "office" means any location where one or
more agents regularly conduct the business of handling funds or securities or
effecting any transactions in, or inducing or attempting to induce the purchase
or sale of, any security. The term "office" as used in this section is not
related to the term "branch office" defined in 115.1 of this chapter (relating
to General Provisions).
(e) Records to be preserved by dealers.
(1) Persons subject to subsection (b) of this
section shall preserve:
(A) all records
required to be made pursuant to paragraphs (1), (2), (3), (5), (17), and (18)
of subsection (b) of this section for a period of not less than six years from
the end of the fiscal year during which the last entry was made on such record,
the first two years in an easily accessible place; and
(B) all records required to be made pursuant
to paragraphs (4), (6)-(10), and (14)-(16) of subsection (b) of this section
for a period of not less than three years from the end of the fiscal year
during which the last entry was made on such record, the first two years in an
easily accessible place.
(2) Persons subject to subsection (b) of this
section shall maintain and preserve in an easily accessible place:
(A) all records required to be made pursuant
to paragraph (11) of subsection (b) of this section until at least three years
following termination of the employment or other relationship between the
dealer and the person to whom the records relate;
(B) All account record information required
pursuant to subsection (b)(13) of this section until at least six years after
the earlier of the date the account was closed or the date on which the
information was replaced or updated;
(C) Each report which a securities regulatory
authority has requested or required the dealer to make and furnish to it
pursuant to an order or settlement, and each securities regulatory authority
examination report until three years after the date of the report;
(D) Each compliance, supervisory, and
procedures manual, including any updates, modifications, and revisions to the
manual, describing the policies and practices of the dealer with respect to
compliance with applicable laws and rules, and supervision of the activities of
each natural person associated with the dealer until three years after the
termination of the use of the manual; and
(E) All reports produced to review for
unusual activity in customer accounts until 18 months after the date the report
was generated. In lieu of maintaining the reports, a dealer may produce
promptly the reports upon request by a representative of the Securities
Commissioner. If a report was generated in a computer system that has been
changed in the most recent 18 month period in a manner such that the report
cannot be reproduced using historical data in the same format as it was
originally generated, the report may be produced by using the historical data
in the current system, but must be accompanied by a record explaining each
system change which affected the reports. If a report is generated in a
computer system that has been changed in the most recent 18 month period in a
manner such that the report cannot be reproduced in any format using historical
data, the dealer shall promptly produce upon request a record of the parameters
that were used to generate the report at the time specified by a representative
of the Securities Commissioner, including a record of the frequency with which
the reports were generated.
(3) Persons registered as dealers in Texas
shall preserve for a period of not less than three years from the end of the
fiscal year during which the last entry was made on such record, the first two
years in an easily accessible place:
(A) all
checkbooks, bank statements, cancelled checks, and cash
reconciliations;
(B) all bills
receivable or payable (or copies thereof), paid or unpaid, relating to the
business of the dealer, as such;
(C) originals of all communications received
and copies of all communications sent by the dealer (including interoffice
memoranda and communications) relating to the business of the dealer. As used
in this subparagraph, the term "communications" includes sales
scripts;
(D) all trial balances,
financial statements, branch office reconciliations, and internal audit working
papers relating to the business of the dealer;
(E) all guarantees of accounts and all powers
of attorneys and other evidence of the granting of any discretionary authority
given in respect of any account, and copies of resolutions empowering an agent
to act on behalf of a corporation;
(F) all written agreements (or copies
thereof) entered into by the dealer relating to the business of the dealer,
including agreements with respect to any account;
(G) all customer complaints received by the
dealer relating to the business of the dealer, and all documents relating to
such complaints; and
(H) all
information including but not limited to offering materials and subscription
agreements on any private placements offered by the dealer.
(4) Persons registered as dealers
in Texas shall preserve for a period of not less than six years from when a
customer's account was closed, any account cards or records which relate to the
terms and conditions with respect to the opening and maintenance of such
account.
(5) Persons registered as
dealers in Texas shall preserve for at least three years after the termination
of the enterprise partnership articles and any amendments thereto, articles of
incorporation, charters, minute books, and stock certificate books of the
dealer and of any predecessor, all Forms BD, all Forms BDW, all amendments to
these forms, all licenses or other documentation showing the registration of
the dealer with any securities regulatory authority.
(6) The records required to be maintained and
preserved pursuant to this section may be immediately produced or reproduced on
microfilm or other photograph and may be maintained and preserved for the
required time in that form provided that such microfilms or other photographs
are arranged and indexed in such a manner as to permit the immediate location
of any particular document, and that such microfilms or other photographs are
at all times available for inspection by representatives of the Securities
Commissioner together with facilities for immediate, easily readable projection
of the microfilm or other photograph and for the production of easily readable
facsimile enlargements.
(7) If a
person ceases to be registered as a dealer in Texas, such person shall for the
remainder of the periods of time specified in this section continue to preserve
the records required herein.
(8)
For purposes of transactions in municipal securities by municipal securities
dealers, compliance with Rule G-9 of the Municipal Securities Rulemaking Board
will be deemed to be compliance with this subsection.
(9) The records required to be maintained
pursuant to this section may be maintained by any electronic storage media
available so long as such records are available for immediate and complete
access by representatives of the Securities Commissioner. Any electronic
storage media must preserve the records exclusively in a non-rewriteable,
non-erasable format; verify automatically the quality and accuracy of the
storage media recording process; serialize the original and, if applicable,
duplicate units of storage media, and time-date for the required period of
retention the information placed on such electronic storage media; and have the
capacity to download indexes and records preserved on electronic storage media
to an acceptable medium. In the event that a records retention system
commingles records required to be kept under this section with records not
required to be kept, representatives of the Securities Commissioner may review
all commingled records.
(f) The Securities Commissioner has a right to review all records maintained by registered dealers regardless of whether such records are required to be maintained under any specific applicable rule provision.
(g) Records for the most recent two year period required to be made and maintained pursuant to subsections (d), (e)(2)(D), and (e)(3)(C) of this section, which relate to an office shall be maintained at the office to which they relate. If an office is a private residence where only one agent (or multiple agents who reside at that location and are members of the same immediate family) regularly conducts business, and it is not held out to the public as an office nor are funds or securities of any customer of the dealer handled there, the dealer need not maintain records at that office, but the records must be maintained at another location within Texas as the dealer may select. Rather than maintain the records at each office, the dealer may choose to produce the records promptly at the request of a representative of the Securities Commissioner at the office to which they relate or at another location agreed to by the representative.
Disclaimer: These regulations may not be the most recent version. Texas may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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