Standard V(C) – Record Retention

Standard V(C) – Record Retention indicates that CFA members must develop a method for maintaining records for analysis, recommendations, and actions.

Compliance

Responsibility to maintain records typically falls upon a firm rather than an individual.  That said, each member must keep accurate records that support investment-related communications.  These records can be electronic or hard-copy.

Local regulations may specify a timeframe for which a firm must hold specific categories of information. Firms must implement policies to comply with regulations to maintain investment records and client communication. In the absence of local regulation, CFA recommends retaining records for seven years.

Violation

Although the bulk of responsibility for Standard V(C) – Record Retention falls to a firm, individual members must maintain client records to avoid violating this standard.  For example, clients’ IPS, documents related to discussions of risk and limitations, and periodic updates must be retained.

Question

Nigella Reese enjoys lunch with a client whose portfolio she manages.  During lunch, Reese recommends to the client that he reduce his stock holding in ABC Enterprises due to loss of patent protection on their most popular product. To comply with Standard V(C) – Record Retention, Reese should do the following when she returns to her office after lunch?

A. Discuss her lunch conversation with her boss.

B. Document the investment recommendation made over lunch with Reese’s client.

C. Identify other clients for whom ABC Enterprises may be a suitable investment.

Solution

The correct answer is B.

Standard V(C) – Record Retention requires that investment professionals maintain record of all investment recommendations and actions.  Reese should immediately record details of the recommendations made to her client regarding ABC Enterprises, as well as any client decisions made during their time together.