Appointing a Custodian of Books and Records

by Julie Mendel, Senior Product Manager | Jan 15, 2020
What Are Acquisition Brokers? CAB Rules & Supervisory Regulations

FINRA has changed the rules for filing a Uniform Request for Broker-Dealer Withdrawal (Form BDW)[i]

 The changes include:
  • Giving members the option of designating another FINRA member as the custodian of its books and records on Form the form;
  • A clarification of the obligations of a designated custodian; and
  • A requirement that the designated custodian consents to act in such a capacity.

The obligations of a designated custodian include: 
  • The custodian must preserve the books and records on behalf of the withdrawing firm for the remainder of the applicable retention periods;
  • The custodian must make preserved records available for inspection by FINRA upon request;
  • The custodian must also preserve and produce the withdrawing firm’s books and records in the same state in which they were received to ensure that the records are not altered after the custodian takes possession;
  • The custodian must treat the books and records that it receives from the withdrawing firm as if they were its own books and records; and
  • The custodian must arrange upon its dissolution for the books and records of the withdrawing firm to continue to be retained for the remainder of the applicable retention periods under FINRA and SEC rules.

These obligations do not include a requirement that the custodian verify the completeness or accuracy of the books and records it receives from a withdrawing firm.

In addition, a designated custodian must confirm they understand their obligations and provide informed consent to abide by the record-keeping obligations imparted by the rules. The consent form includes confirmation that the custodian consents to:
  • act in the capacity of a custodian;
  • understands the responsibilities of a custodian; and
  • agrees to provide the books and records of the withdrawing firm to a regulator as requested.
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[i] Regulatory Notice 19-16; FINRA Rule 4570