Texas Administrative Code › Title 7 - BANKING AND SECURITIES › Part 7 - STATE SECURITIES BOARD › Chapter 115 - SECURITIES DEALERS AND AGENTS › Section 115.5 - Minimum Records

Current through Reg. 49, No. 28; July 12, 2024
(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:
(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.