Books and Records (Investment Adviser)
The books and records rules require registered investment advisers and broker-dealers to maintain specific records for defined retention periods. SEC Rule 204-2 governs RIAs; Rule 17a-4 governs broker-dealers.
Definition
Books and Records —
The "books and records" rules under the Investment Advisers Act (Rule 204-2) and the Securities Exchange Act (Rule 17a-4) require registered investment advisers and broker-dealers to create, maintain, and preserve specific categories of business records for defined retention periods, in formats that can be produced to regulators on demand.
What records RIAs must keep (Rule 204-2)
Advisers Act Rule 204-2 requires registered investment advisers to maintain:
- A journal of all transactions in client funds or securities
- All ledgers reflecting assets, liabilities, income, and expense accounts
- All memoranda of orders given or received for the purchase or sale of securities
- All written communications sent and received relating to any recommendation, advice, or report
- All charts, graphs, or other documents used in formulating investment advice
- All written agreements with clients
- Powers of attorney and other authorizations from clients
- Compliance policies and procedures
- A list of all accounts in which the adviser has custody or possession of client funds
General retention period: 5 years from the end of the fiscal year in which the record was created; the first 2 years in an easily accessible place.
AI-generated research as a record
AI research output used to inform investment recommendations falls within Rule 204-2's requirement to keep "work papers and other documents" that form the basis for advice. AdvisorIQ automatically logs each research query, sources retrieved, and the answer generated — this log serves as the books-and-records entry.
| AI use case | Record required? | Retention period |
|---|---|---|
| Research query used to prepare a recommendation | Yes | 5 years |
| Internal analysis not related to a client | Unclear — consult compliance counsel | — |
| AI-drafted client communication | Yes (as a written communication) | 5 years |
| Meeting prep brief based on client documents | Yes (as work papers) | 5 years |
Broker-dealer records (Rule 17a-4)
Rule 17a-4 under the Securities Exchange Act imposes similar retention requirements on broker-dealers, with some differences:
- Electronic records must be stored in non-rewriteable, non-erasable (WORM) format
- Records must be indexed and readily retrievable
- Retention periods range from 3 to 6 years depending on record type
Related
- Fiduciary Standard
- Books and records for AI-assisted research: what RIAs need to keep
- FINRA Rule 3110 and AI
This glossary entry is general information, not legal advice.
Keep reading
All glossary →Reg BI (Regulation Best Interest)
Regulation Best Interest (Reg BI) is an SEC rule requiring broker-dealers to act in the best interest of retail customers when making investment recommendations. Effective June 30, 2020.
RIA vs. Broker-Dealer: Key Differences
Registered investment advisers (RIAs) and broker-dealers are both regulated financial intermediaries, but they operate under different regulatory frameworks, compensation structures, and standards of care.
Form ADV
Form ADV is the SEC's registration form for investment advisers. Part 1 contains business and disciplinary information; Part 2 (the brochure) must be delivered to clients and describes the adviser's services, fees, and conflicts of interest.