Books and records

Books and records are the documents an investment advisor is required by rule to create and retain — advice given, communications sent, advertisements published, and the basis for recommendations — available for regulatory examination.

Create and retain

The obligation has two halves, and firms usually satisfy the second while failing the first. It is not enough to keep what exists; certain records must be made.

What is covered

Client agreements and account records. Communications relating to advice, including electronic ones. Advertisements and the substantiation supporting any claim in them. Trading records. The compliance program and its annual review.

Electronic communication is the recurring failure

Business conducted through personal messaging applications is still business, and it is still required to be captured. Enforcement in this area has been significant and expensive.

Substantiation before publication

Under the Marketing Rule, an advisor must have a reasonable basis for claims in advertising, and be able to demonstrate it. The support has to exist before the claim is published, not be assembled afterwards.

This is the practical reason to avoid superlatives. Not that they are forbidden — that defending one requires a documented, dated survey that stays current.