SEC Amends Record-Keeping Requirements for Investment Advisors

 

SEC Amends Record-Keeping Requirements for Investment Advisors

The SEC has made amendments to record-keeping requirements, Rule 275.206(4)-2, for Registered Investment Advisors. The amendments focus on maintaining accurate and up-to-date records of allocations, confirmations, and affirmations (as defined below) related to securities transactions subject to Rule 15c6-2(a). These changes apply universally to registered investment advisors and include provisions for maintaining records electronically. The rule was finalized on May 5, 2023 with the Federal Registrar and has a compliance date of May 28, 2024.

Let's start with the definable terms within the rule language:

Allocation - Refers to how Advisors divide a trade among different client accounts or distribute securities trades made simultaneously.

Confirmation and Affirmation - Refers to message exchanges between the Advisor and Broker-Dealer/Custodian to verify trade details, for accurate settlement of trades executed on behalf of clients/investors. This also includes confirmation of the execution of the trade. 

With these changes, Advisors are now required to archive the following:

• The date and time stamp indicating when the trade allocation and trade affirmation occurred. 
• Details, sent or received, about each confirmation received, any allocation made, and each affirmation.

Securities transactions subject to Rule 15c6-2(a) refers to “All Securities”, with certain exemptions, as follows:

• Exempted Securities (e.g. Private Funds)
• Government Securities
• Municipal Securities
• Commercial Paper
• Bankers’ Acceptances
• Commercial Bills
• Security Based-Swaps

Be on the lookout for communications regarding enhanced policies and procedures, along with industry best practices as we continue to review rule requirements. Please do not hesitate to reach out to your Compliance Consultant should you have any questions.

Posted in: