Chapter 10 - Recordkeeping Requirements (v1.2)

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Questions and Answers

What should compliance staff in larger dealer members rely on to stay informed about changes to recordkeeping requirements?

Legal department (correct)

Industry publications

External auditors

Client feedback

Which of the following is NOT a reason for registrants to maintain records?

To assess market trends (correct)

To accurately record business practices

To demonstrate compliance with legislation

To keep track of client transactions

How must records be stored according to compliance standards?

In an easily accessible cloud service

In a safe location in durable form (correct)

In paper format only

In a randomized digital format

What are regulators primarily concerned with regarding record formats?

Accessibility of the records Signup and view all the answers

Which statement about offsite record maintenance is true?

A policy dictating the storage format and retrieval method should be implemented. Signup and view all the answers

Which format has dealer members increasingly adopted for recordkeeping?

Only electronic format Signup and view all the answers

What does the term 'record' include according to CIRO Rules?

All documentation including electronic forms related to business Signup and view all the answers

What is a key factor when implementing a recordkeeping system?

Understanding regulators' expectations for each type of information Signup and view all the answers

Which aspect is equally as important as the record itself in compliance recordkeeping?

The manner in which the record is kept Signup and view all the answers

What is a necessary action to ensure that records of supervision are retrievable when requested?

Complete the form daily and file it in an accessible location. Signup and view all the answers

What should be maintained alongside email communications for effective supervision?

An email log for correspondence. Signup and view all the answers

What aspect of emails must be managed for the supervision system to be effective?

The volume of emails sent. Signup and view all the answers

Which of the following is a potential risk during the departure of a business location supervisor?

Compromised evidence of supervision. Signup and view all the answers

What do third-party supervisory systems primarily do?

Automate the supervision process and documentation. Signup and view all the answers

Why are email communications considered legally discoverable?

They are written records with longevity. Signup and view all the answers

What minimum standard must be adhered to regarding equity trades?

Equity trades over $5,000 in stocks trading at under $5 must be reviewed daily. Signup and view all the answers

What should be implemented to ensure supervisory emails remain accessible?

Periodic archiving of email folders. Signup and view all the answers

What documentation is essential for communicating with registered representatives (RRs)?

A follow-up strategy for email communications. Signup and view all the answers

What may warrant consideration for retention besides business-related emails?

Internal emails. Signup and view all the answers

What is the primary focus of CIRO’s recordkeeping requirements?

Providing evidence of adequate supervision Signup and view all the answers

Why is electronic recordkeeping generally preferred over paper recordkeeping?

It simplifies searches for information Signup and view all the answers

What should be done with paper records that contain notes or comments, according to best practices?

They should be placed in client files or stored by date Signup and view all the answers

What is a key benefit of having someone in charge of maintaining records?

To ensure compliance with specific recordkeeping requirements Signup and view all the answers

Which regulatory focus aligns with FINTRAC’s recordkeeping requirements?

Prevention and detection of money laundering and terrorist financing Signup and view all the answers

What is one of the key challenges often associated with paper recordkeeping?

Time-consuming searches through numerous boxes Signup and view all the answers

What is required by UMIR Rule 10.16 regarding potential breaches of UMIR?

Any noted conduct must be reported to a supervisor or compliance staff. Signup and view all the answers

What action must be taken if a supervisor concludes a potential violation has occurred?

Conduct a diligent investigation and make written records. Signup and view all the answers

How long must dealer members retain records related to reports and findings?

For seven years from the creation of the record. Signup and view all the answers

What supports detection and investigation of money laundering under PCMLTFA?

Direct reporting and client identification requirements. Signup and view all the answers

What is the first step in a securities dealer's compliance regime according to FINTRAC guidelines?

Appointing a compliance officer for oversight. Signup and view all the answers

When must findings of a violation be reported to CIRO?

No later than the 15th day of the month following the findings. Signup and view all the answers

What must be included in the written record if a potential violation is identified?

Details of the report, the investigation, and findings. Signup and view all the answers

Which is NOT a requirement under UMIR for handling breaches?

Making a verbal report to colleagues in the department. Signup and view all the answers

What is the role of gatekeepers under UMIR according to the obligations?

To monitor compliance and report possibly rule breaches. Signup and view all the answers

What is the primary responsibility of the chief anti-money laundering officer in relation to FINTRAC?

Ensuring compliance with record retention and reporting requirements Signup and view all the answers

For how long must dealers retain records pertaining to accounts after they are closed?

Five years from the closure date Signup and view all the answers

What must dealer members do when they suspect a transaction is related to money laundering?

Submit a report to FINTRAC promptly Signup and view all the answers

What should be included in a terrorist property report submitted by dealer members?

Identification of the property controlled by the terrorist or group Signup and view all the answers

When must dealer members submit a terrorist property report to relevant authorities?

As soon as they ascertain the connection Signup and view all the answers

Which of the following records must be maintained for five years after the last business transaction?

Records confirming the existence of an entity and beneficial ownership Signup and view all the answers

Which requirement is NOT true regarding suspicious transactions?

Dealer members must submit reports based on personal opinions Signup and view all the answers

Which agency is NOT mentioned as a recipient of the terrorist property report?

Canadian Anti-Fraud Centre Signup and view all the answers

What is one of the key compliance actions required by dealer members under PCMLTFA?

Registering with FINTRAC for timely report submissions Signup and view all the answers

What is the consequence of failing to comply with record-keeping requirements under PCMLTFA?

License revocation by FINTRAC Signup and view all the answers

Study Notes

Recordkeeping Requirements

Recordkeeping requirements extend beyond daily business records, encompassing compliance, supervision, complaints, and investigations.
Regulations are dynamic and vary between legal entities and regulatory agencies.
Compliance departments should maintain updated records of requirements based on regulator and information type.
Larger dealer members often rely on legal departments for updates on recordkeeping requirements, including limitation periods.
Registrants must maintain records for two reasons: to accurately document business practices, financial affairs, and client transactions, and to demonstrate compliance with securities legislation.
The firm's recordkeeping methods are crucial to ensuring records are safely stored in a durable format and readily accessible to regulators.
CIRO defines a "record" as documentation related to a Regulated Person's business, including books, records, client files, and electronic documents.

Recordkeeping Formats

Dealer members primarily maintain electronic records, although some still utilize paper records.
Regulators focus on record accessibility rather than format.
Implementing recordkeeping systems should align with regulator expectations for each information type.
Records created or maintained offsite (e.g., supervision records) require policies for format, storage, and retrieval.
Firms should establish procedures for recording recipients when distributing preliminary prospectuses.
Daily completion and accessible storage of supervision forms ensure an appropriate record for compliance department or CIRO retrieval.
Email can demonstrate supervision, but email management is crucial for effectiveness.

Email and Supervision

Supervisors should follow up on email communications to avoid oversight.
Email responses to inquiries should be stored in accessible files.
Supervisors can maintain email folders for each supervised RR, ensuring appropriate filing of inquiries and responses.
Procedures should ensure email accessibility.
Email archiving methods should address supervisor or compliance staff departures.
Third-party supervisory systems can automate supervision processes and documentation, including workflow for timely query resolution.
Staff should be aware that emails are legally discoverable and can be used as evidence.

CIRO Email Archiving Requirements

CIRO mandates investment dealers to archive all business-related emails, including those sent from mobile devices.
Dealer members should consider the retention of internal emails.

Supervision Reporting Requirements

CIRO sets minimum standards for exception reports.
Dealer members can create additional reports for supervision purposes.
Daily supervision includes reviewing equity trades over $5,000 in stocks trading below $5 per share.
UMIR mandates markers for specific order types transmitted to marketplaces.
UMIR Rule 10.16, Gatekeeper Obligations, requires reporting potential breaches of UMIR or SRO regulations.

Gatekeeper Obligations

Supervisors or compliance staff must investigate and document reported potential violations.
If a violation is identified, a report must be filed with CIRO within 15 days.
CIRO encourages reporting potential violations.
Dealer members must retain reports, reviews, and findings for seven years.
CIRO has the right to inspect and copy records during normal business hours.
These review and reporting requirements are in addition to other securities legislation or SRO rule provisions.

FINTRAC Requirements

Businesses and industries reporting to FINTRAC must comply with PCMLTFA regulations.
PCMLTFA sets forth direct reporting, client identification, and recordkeeping requirements for securities dealers.
These requirements aim to detect, investigate, and prosecute money laundering and terrorist financing offenses.

Dealer Member FINTRAC Compliance

Canadian securities dealers must implement a compliance regime aligned with FINTRAC guidelines.
A compliance officer, often the CCO, oversees the implementation of the dealer member's money laundering and terrorist financing prevention program.
PCMLTFA mandates record retention for FINTRAC access within 30 days of a request.
Signature cards, account operating agreements, and account application forms must be kept for five years from account closure.
Entity existence and beneficial ownership records must be retained for five years from the last business transaction.

Reporting Requirements

Dealers must file reports to FINTRAC when there are reasonable grounds to suspect money laundering or terrorist financing activities.
Suspicion also applies to properties in the firm's possession owned or controlled by suspected terrorists or terrorist groups.
FINTRAC reports are typically filed electronically, but paper submissions are accepted for entities lacking electronic capabilities.

Terrorist Property Holdings

Dealer members must submit a terrorist property report to FINTRAC, RCMP, CSIS, and CIRO when property in their possession is owned or controlled by a terrorist or terrorist group.
Advisor records should be accessible to the dealer member for a reasonable period, even after departure.

Record Retention Importance

Retention of compliance and supervision records is crucial.
Paper-based records pose challenges for storage, retrieval, and access.
Electronically stored records are generally more efficient.
Paper notes should be stored separately by date or integrated into client files.

Recordkeeping Summary

Dealer members should establish record retention procedures that eliminate ambiguity and ensure consistency across locations.
Recordkeeping procedures aid compliance audits.
Regulators have varying recordkeeping requirements.
CIRO focuses on evidence of adequate supervision, critical for investigations and disciplinary actions.
FINTRAC recordkeeping requirements concentrate on preventing and detecting money laundering and terrorist financing.
Record retention strategies should include accessible storage methods.
Designated personnel are responsible for maintaining records and ensuring accessibility when needed.

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Description

Explore the essential recordkeeping requirements that businesses must adhere to, including compliance, supervision, and investigations. This quiz highlights the dynamic nature of regulations across different legal entities and the importance of maintaining accurate documentation for financial affairs and client transactions. Test your knowledge on effective recordkeeping practices and regulatory standards.