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

    (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.


Source Note: The provisions of this §115.5 adopted to be effective August 12, 2001, 26 TexReg 5794; amended to be effective November 26, 2001, 26 TexReg 9581; amended to be effective October 29, 2003, 28 TexReg 9236; amended to be effective February 21, 2008, 33 TexReg 1319

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