<<Prev Rule

Texas Administrative Code

Next Rule>>
TITLE 7BANKING AND SECURITIES
PART 7STATE SECURITIES BOARD
CHAPTER 115SECURITIES DEALERS AND AGENTS
RULE §115.5Minimum Records

(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:

Cont'd...

Next Page

Link to Texas Secretary of State Home Page | link to Texas Register home page | link to Texas Administrative Code home page | link to Open Meetings home page