Closing an investment advisory firm: books and records first, data second
A registered adviser that closes does not get to delete its books and records. The rule that governs them runs for five years, and the files that matter to a regulator, such as client agreements, advertisements and compliance reviews, are the ones that sit in the same email system an AI lab would care about. The way through is to keep the required set whole and look at what the firm wrote for itself.
Rules to read first
Read the adviser recordkeeping rule in full. It lists the records, from advisory contracts to written communications, and it covers electronic copies.
| Rule | What it requires |
|---|---|
| 17 CFR 275.204-2(e)(1) | An investment adviser keeps its required books and records for not less than five years from the end of the fiscal year in which the last entry was made, with the first two years in an appropriate office of the adviser. |
| Form ADV-W | A registered adviser that stops advising withdraws its registration, and the withdrawal does not end the record duty. |
| State adviser rules | A smaller adviser is often registered with its state. State books and records rules are similar in outline and differ in detail. |
What the firm wrote for itself
Commentary and research notes that the firm sent to clients are also records the rule requires it to keep. Licensing a copy does not replace keeping the original.
- Market commentary and client letters, with the client list removed.
- Research notes and the reasoning behind an allocation decision.
- Onboarding questionnaires as blank forms, and the process for working through them.
- Meeting preparation notes, and the follow-up emails that summarize a decision.
- Compliance manual text and the testing procedures that sit under it.
What stays out
The GLBA privacy rule in the United States rules governs sharing customer information with outside companies. A list built from client accounts counts as customer information even if names are missing.
| Record | Why it stays out |
|---|---|
| Client accounts, balances and holdings | Non-public personal information under the privacy rules for financial firms. |
| Advisory agreements and fee schedules | They name the client and the terms. |
| Trade blotters and order tickets | They tie a client to a position at a time. |
| Custodian statements | The custodian’s data is held under its own terms. |
The practical order
Name who holds the required books and records and where, then cancel nothing that stores them. After that, an export of the firm’s own commentary and procedures can be reviewed by the chief compliance officer, who knows which items the rule treats as a record and which are the firm’s own work.
Read next
- Closing or bankrupt companies. Who signs and what to keep.
- Records to keep before you close. A checker by industry.
- Liability. Who answers for what in a deal.
- Advisory firms while open. What a running firm can license.
Questions about closing an investment advisory firm: books and records first, data second
Does withdrawing registration end the five year duty?
No. The rule counts from the end of the fiscal year of the last entry on each record.
Can we license client newsletters?
Yes, once client lists and anything that identifies a client are removed, and the original stays in the required set.
Who reviews the export?
The chief compliance officer or an outside compliance consultant, since they know which items count as books and records.
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