1. (a) Dealer records. (Compliance with the record-keeping requirements of the United States Securities and Exchange Commission (17 Code of Federal Regulations §240.17a-3 and §240.17a-4) will satisfy the following requirements.)

   1. (1) Records to be made by certain dealers. A person or company registered in Texas as a general securities dealer or a dealer in municipal securities shall make and keep current the following minimum records or the equivalent thereof.

      1. (A) 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 all 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. (B) Ledgers (or other records) that reflect all assets and liabilities, income and expense, and capital accounts.
      3. (C) 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. (D) Ledgers (or other records) that reflect the following:

         1. (i) securities in transfer;
         2. (ii) dividends and interest received;
         3. (iii) securities borrowed and securities loaned;
         4. (iv) monies borrowed and monies loaned (together with a record of the collateral therefor and any substitutions in such collateral); and
         5. (v) securities failed to receive and failed to deliver.
      5. (E) 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 account or for the account of his 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. (F) 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 of entry, the price at which executed, and, to the extent feasible, the time of execution or cancellation. 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 of execution or, if it is not so transmitted, the time when it is received.
      7. (G) 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 broker or dealer, a memorandum of each order received, showing the time of receipt, the terms and conditions of the order, and the account in which it was entered.
      8. (H) 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. (I) 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. (J) 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. (K) A questionnaire or application for employment executed by each partner, officer, director, salesman, 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 a salesman, officer, or partner will satisfy this requirement):

          1. (i) his name, address, social security number, and the starting date of his employment or other association with the dealer;
          2. (ii) his date of birth;
          3. (iii) the educational institutions attended by him and whether or not he graduated therefrom;
          4. (iv) a complete, consecutive statement of all his business connections for at least the preceding 10 years, including his reason for leaving each prior employment, and whether the employment was part-time or full-time;
          5. (v) a record of any denial, suspension, expulsion, or revocation of membership or registration of any dealer with which he was associated in any capacity when such action was taken;
          6. (vi) a record of any denial of membership or registration, and of any disciplinary action taken, or sanction imposed, upon him by any federal or state agency, or by any national securities exchange or national securities association, including any finding that he was a cause of any disciplinary action or had violated any law;
          7. (vii) a record of any permanent or temporary injunction entered against him or any dealer with which he was associated in any capacity at the time such injunction was entered;
          8. (viii) 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 has been the subject; and
          9. (ix) a record of any other name or names by which he has been known or which he has used.

   2. (2) Exemptions from the requirements of paragraph (1) of this subsection:

      1. (A) Paragraph (1) of this subsection shall not be deemed to require a dealer to make or keep such records of transactions cleared for such dealer by a member of the National Association of Securities Dealers, Inc., the American Stock Exchange, the Boston Stock Exchange, the Chicago Stock Exchange, the New York 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. (B) Paragraph (1) of this subsection shall not be deemed to require a dealer to make or keep 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. (C) The records specified in paragraph (1) of this subsection shall not be required 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. (D) 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 paragraph (1) of this subsection.
   3. (3) Restricted dealers. Dealers registered in specialized categories, other than municipal securities dealers such as oil and gas dealers and real estate dealers, etc., shall keep and maintain records adequate to accurately reflect customer transactions, and dealer's financial condition.

   4. (4) Records to be preserved by dealers.

      1. (A) Persons subject to paragraph (1) of this subsection shall preserve:

         1. (i) all records required to be made pursuant to subparagraphs (A), (B), (C), and (E) of paragraph (1) of this subsection for a period of not less than five 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. (ii) all records required to be made pursuant to subparagraphs (D), (F), (G), (H) , (I), and (J) of paragraph (1) of this subsection 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; and
         3. (iii) all records required to be made pursuant to subparagraph (K) of paragraph (1) of this subsection until at least three years following termination of the employment or other relationship between the dealer and the person to whom the records relate.
      2. (B) Persons subject to paragraph (3) of this subsection shall preserve all records required to be made pursuant to paragraph (3) of this subsection for a period of not less than five 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.

      3. (C) 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:

         1. (i) all checkbooks, bank statements, cancelled checks, and cash reconciliations;
         2. (ii) all bills receivable or payable (or copies thereof), paid or unpaid, relating to the business of the dealer, as such;
         3. (iii) originals of all communications received and copies of all communications sent by the dealer (including interoffice memoranda and communications) relating to his business as a dealer;
         4. (iv) all trial balances, financial statements, branch office reconciliations, and internal audit working papers relating to the business of the dealer as such;
         5. (v) all guarantees of accounts and all powers of attorneys and other evidence of the granting of any discretionary authority given in respect to any account, and copies of resolutions empowering an agent to act on behalf of a corporation;
         6. (vi) all written agreements (or copies thereof) entered into by the dealer relating to his business as such, including agreements with respect to any account; and
         7. (vii) all customer complaints received by the dealer relating to his business as such, and all documents relating to such complaints.
      4. (D) Persons registered as dealers in Texas shall preserve for a period of not less than five years from the end of the fiscal year during which 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. (E) 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.
      6. (F) 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 examination 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. (G) 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. (H) 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.

2. (b) Investment adviser records. (Compliance with the record-keeping requirements of the United States Securities and Exchange Commission (17 Code of Federal Regulations §275.204-2) will satisfy the following requirements.)

   1. (1) Records to be made by investment advisers. Persons registered as investment advisers whose principal place of business is located in another state shall maintain records at least in accordance with the minimum record keeping requirements of that state. Persons registered as investment advisers whose principal place of business is located in Texas shall make and keep current the following minimum records or the equivalent thereof:

      1. (A) A journal or journals, including cash receipts and disbursements records, and any other records or original entry forming the basis of entries in any ledger.
      2. (B) General and auxiliary ledgers, (or other comparable records) reflecting asset, liability, reserve capital, income and expense accounts.
      3. (C) A memorandum of each order given by the investment adviser for the purchase or sale of any security, of any instruction received by the investment adviser from the client concerning the purchase, sale, receipt or delivery of a particular security, and of any modification or cancellation of any such order or instruction. Such memoranda shall show the terms and conditions of the order, instruction, modification, or cancellation; shall identify the person connected with the investment adviser who recommended the transaction to the client and the person who placed such order; and shall show the account for which entered, the date of entry, and the bank, broker, or dealer by or through whom executed where appropriate. Orders entered pursuant to the exercise of discretionary power shall be so designated.
      4. (D) A list or other record of all accounts in which the investment adviser is vested with any discretionary power with respect to funds, securities, or transactions of any client.
      5. (E) A copy of each notice, circular, advertisement, newspaper article, investment letter, bulletin, or other communication recommending the purchase or sale of a specific security, which the investment adviser circulates or distributes, directly or indirectly to 10 or more persons (other than investment supervisory clients or persons connected with such investment adviser), and if such notice, circular, advertisement, newspaper article, investment letter, bulletin, or other communication does not state the reasons for such recommendation, a memorandum of the investment adviser indicating the reasons therefor.

      6. (F) In the case of any client receiving investment supervisory or management service, to the extent that the information is reasonably available to or obtainable by the investment adviser, records showing separately for that client:

         1. (i) the client's current position in any security; and
         2. (ii) all securities purchased and sold and the date, amount, and price of each purchase and sale.

      7. (G) In the case of an investment adviser who has custody or possession of the funds or securities of any client:

         1. (i) a journal or other record showing all purchases, sales, receipts and deliveries of securities (including certificate numbers) for such accounts and other debits and credits to such accounts;
         2. (ii) a separate ledger account for each such client showing all purchases, sales, receipts, and deliveries of securities, the date and price of each such purchase and sale, and all debits and credits;
         3. (iii) copies of confirmations of all transactions effected by or for the account of any such client; and
         4. (iv) a record for each security in which any client has a position, which record shall show the name of each such client having any interest in each security, the amount or interest of each such client, and the location of each such security.

      8. (H) A record of every transaction in a security in which the investment adviser or any agent of the investment adviser has, or by reason of such transaction acquires any direct or indirect beneficial ownership, except:

         1. (i) transactions effected in any account over which neither the investment adviser nor any agent of the investment adviser has any direct or indirect influence or control; and
         2. (ii) transactions in securities which are direct obligations of the United States. Such record shall state the title and amount of the security involved; the date and nature of the transaction (i.e., purchase, sale, or other acquisition or disposition); the price at which it was effected; and the name of the broker, dealer, or bank with or through whom the transaction was effected. A transaction shall be recorded not later than 10 days after the end of the calendar quarter in which the transaction was effected.

   2. (2) Records to be preserved by investment advisers.

      1. (A) Persons registered as investment advisers in Texas shall preserve all records required pursuant to paragraph (1) of this subsection for a period of not less than five 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. (B) Persons registered as investment advisers 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:

         1. (i) all checkbooks, bank statements, cancelled checks, and cash reconciliations of the investment adviser;
         2. (ii) all bills or statements (or copies thereof) paid or unpaid, relating to the business of the investment adviser as such;
         3. (iii) all trial balances, financial statements, and internal audit working papers relating to the business of such investment adviser;

         4. (iv) originals of all written communications received and copies of all written communications sent by such investment adviser relating to:

            1. (I) any recommendation made or proposed to be made and any advice given or proposed to be given;
            2. (II) any receipt, disbursement, or delivery of funds or securities; or
            3. (III) the placing or execution of any order to purchase or sell any security. Provided, however, that the investment adviser shall not be required to keep any unsolicited market letters and other similar communications of general public distribution not prepared by or for the investment adviser, and that if the investment adviser sends any notice, circular, or other advertisement offering any report, analysis, publication, or other investment advisory service to more than 10 persons, the investment adviser shall not be required to keep a record of the names and addresses of the persons to whom it was sent; except that if such notice, circular, or advertisement is distributed to persons named on any list, the investment adviser shall retain with the copy of such notice, circular, or advertisement a memorandum describing the list and the source thereof;
         5. (v) all powers of attorney and other evidences of the granting of any discretionary authority by any client to the investment adviser or copies thereof;
         6. (vi) all written agreements (or copies thereof) entered into by the investment adviser with any client or otherwise relating to the business of such investment adviser as such; and
         7. (vii) all complaints received from investment clients, and all documents relating to such complaints.
      3. (C) Persons registered as investment advisers 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 investment adviser and of any predecessor.
      4. (D) If a person ceases to be registered as an investment adviser in Texas, such person shall, for the remainder of the time period specified in this section, continue to preserve the records required in this section.
      5. (E) 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 examination 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.
3. (c) The records required to be maintained pursuant to this section may be maintained by any electronic medium available so long as such records are available for immediate free access by representatives of the Securities Commissioner. 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.

Source Note:The provisions of this §115.5 adopted to be effective January 1, 1976; amended to be effective January 25, 1980, 5 TexReg 139; amended to be effective October 30, 1985, 10 TexReg 4083; amended to be effective September 1, 1987, 12 TexReg 2511; amended to be effective April 9, 1997, 22 TexReg 3221.