Rule 204-2: the adviser books and records rule
12 min read
Who Rule 204-2 binds
Rule 204-2 is the SEC books and records rule for investment advisers. It applies to “every investment adviser registered or required to be registered under section 203 of the Act”: an adviser registered with the SEC, and one required to be. This guide does not cover state-registered advisers; check your state's own rules. A broker-dealer keeps its records under Exchange Act Rules 17a-3 and 17a-4 and FINRA Rule 4511, set out in our FINRA Rule 4511 guide.
The rule has two halves. Paragraphs (a) to (c) say what to make and keep “true, accurate and current”. Paragraphs (e) to (h) say how long, where, and on what media. An adviser that moves from state to SEC registration also preserves the books and records the state of its principal office required before the switch, under paragraph (k). The rest of an adviser's program is mapped in RIA compliance for a small adviser.
Quick reference
- Most records, from the end of the fiscal year of the last entry5 years17 CFR 275.204-2(e)(1)
- Of which in an appropriate office of the adviserfirst 217 CFR 275.204-2(e)(1)
- Advertisements and performance backup, from the last dissemination5 years17 CFR 275.204-2(e)(3)(i)
- Approvals of access persons' purchases, after the fiscal year of approval5 years17 CFR 275.204-2(a)(13)(iii)
- Charters and minute books, after the enterprise ends3 years17 CFR 275.204-2(e)(2)
- WORM or audit-trail storage for advisersNot in 204-2(g)17 CFR 275.204-2(g)
Periods as the rule words state them. Your compliance counsel should confirm how they apply to your firm.
The record list, (a)(1) to (a)(17)
Paragraph (a) is a list of named records. The first six are the books of any business: journals, ledgers, order memoranda, bank records, bills and financial statements. Then come the records that make an adviser an adviser: what it wrote to clients, which accounts it has discretion over, its agreements, its marketing, its code of ethics, its brochures, and its compliance program. Filter the card below by a word or a group.
The adviser's records under 204-2(a)
Try “email”, “brochure” or “performance”.
22 of 22 rows
- (a)(1)
Journals
Cash receipts and disbursements and every other record of original entry behind the ledger.
5 years from the end of the fiscal year of the last entry, first 2 in an appropriate office (e)(1)
- (a)(2)
General and auxiliary ledgers
Asset, liability, reserve, capital, income and expense accounts.
5 years from the end of the fiscal year of the last entry, first 2 in an appropriate office (e)(1)
- (a)(3)
Order memoranda
Each order and instruction, its terms, who recommended and who placed it, the account and the date; discretionary orders marked as such.
5 years from the end of the fiscal year of the last entry, first 2 in an appropriate office (e)(1)
- (a)(4)
Bank records
Check books, bank statements, cancelled checks and cash reconciliations.
5 years from the end of the fiscal year of the last entry, first 2 in an appropriate office (e)(1)
- (a)(5)
Bills and statements
Every bill or statement, paid or unpaid, relating to the advisory business.
5 years from the end of the fiscal year of the last entry, first 2 in an appropriate office (e)(1)
- (a)(6)
Trial balances and financial statements
Including internal audit working papers.
5 years from the end of the fiscal year of the last entry, first 2 in an appropriate office (e)(1)
- (a)(7)
Written communications
Originals received and copies sent on advice, funds or securities, orders, and performance.
5 years from the end of the fiscal year of the last entry, first 2 in an appropriate office (e)(1)
- (a)(8)
List of discretionary accounts
Every account in which the adviser is vested with any discretionary power.
5 years from the end of the fiscal year of the last entry, first 2 in an appropriate office (e)(1)
- (a)(9)
Powers of attorney
Powers of attorney and other evidence of discretionary authority granted by a client.
5 years from the end of the fiscal year of the last entry, first 2 in an appropriate office (e)(1)
- (a)(10)
Written agreements
Every written agreement with a client or relating to the advisory business.
5 years from the end of the fiscal year of the last entry, first 2 in an appropriate office (e)(1)
- (a)(11)
Advertisements and mass communications
Each advertisement, each communication to ten or more people outside the firm, and any rating questionnaire obtained.
5 years from the end of the fiscal year of the last dissemination, first 2 in an appropriate office (e)(3)(i)
- (a)(12)(i)
Code of ethics
The code in effect, or in effect at any time within the past five years.
Each version or name within the past five years (the rule's own words) own text
- (a)(12)(ii)
Code violations
Each violation of the code and any action taken as a result.
5 years from the end of the fiscal year of the last entry, first 2 in an appropriate office (e)(1)
- (a)(12)(iii)
Code acknowledgments
Written acknowledgments of each current supervised person and each from the past five years.
Each version or name within the past five years (the rule's own words) own text
- (a)(13)(i)
Access-person reports
Each report an access person makes under Rule 204A-1(b).
5 years from the end of the fiscal year of the last entry, first 2 in an appropriate office (e)(1)
- (a)(13)(ii)
List of access persons
Current access persons and those of the past five years.
Each version or name within the past five years (the rule's own words) own text
- (a)(13)(iii)
Pre-approval decisions
Each decision, with its reasons, approving an access person's acquisition of securities.
At least 5 years after the end of the fiscal year of the approval (a)(13)(iii)
- (a)(14)
Brochures, supplements and Form CRS
Each version and amendment, the delivery dates, and the managed-assets and disciplinary-event papers where they apply.
5 years from the end of the fiscal year of the last entry, first 2 in an appropriate office (e)(1)
- (a)(15)
Testimonial and endorsement records
Disclosures not in the ad, the reasonable-basis file, and the names of affiliated promoters.
5 years from the end of the fiscal year of the last entry, first 2 in an appropriate office (e)(1)
- (a)(16)
Performance backup
Everything needed to form the basis for or demonstrate a performance figure shown.
5 years from the end of the fiscal year of the last dissemination, first 2 in an appropriate office (e)(3)(i)
- (a)(17)(i)
Compliance policies and procedures
The Rule 206(4)-7 policies in effect, or in effect at any time within the past five years.
Each version or name within the past five years (the rule's own words) own text
- (a)(17)(ii)-(iii)
Annual review records
Records of the annual review, and any internal control report obtained under Rule 206(4)-2(a)(6)(ii).
5 years from the end of the fiscal year of the last entry, first 2 in an appropriate office (e)(1)
17 CFR 275.204-2(a)(1)-(17), (e)(1), (e)(3)(i)
The list goes on past (a)(17). Paragraph (a)(18) covers political contribution records for advisers with government entity clients, (a)(19) the intended-audience record for hypothetical performance, and (a)(25) the Regulation S-P records covered in our Regulation S-P guide. Paragraph (b) adds records for an adviser with custody of client funds or securities, and paragraph (c) adds portfolio records and proxy voting records. The books and records checklist generator builds the full list for the activities your firm actually has.
Written communications under (a)(7)
The sentence ends on four subjects: any recommendation or advice given or proposed; any receipt, disbursement or delivery of funds or securities; the placing or execution of any order to buy or sell a security; and performance or rate of return of managed accounts, portfolios or securities recommendations. The channel does not appear in the list. A text, a chat message or a portal note on one of those subjects is a written communication like a letter. Business messages on personal apps that were never kept are what the SEC's off-channel communications cases were about.
Six messages, read against (a)(7)
| Message | Where in (a)(7) | Result |
|---|---|---|
| An email to a client recommending a rebalance | (a)(7)(i) | Keep |
| A client's text asking you to send a distribution | (a)(7)(ii) | Keep |
| Your reply confirming a trade was placed | (a)(7)(iii) | Keep |
| A quarterly letter showing account returns | (a)(7)(iv) | Keep |
| An unsolicited market letter of general public distribution, not prepared by or for you | Proviso (A) | Not required by (a)(7) |
| An email moving a lunch meeting | None of the four subjects | Ask counsel before you treat it as outside |
17 CFR 275.204-2(a)(7)(i)-(iv) and proviso (A)
The adviser rule is narrower than the broker-dealer one. Rule 17a-4(b)(4) reaches “all communications … relating to its business as such”, and keeps them for three years, the first two in an easily accessible place. Rule 204-2(a)(7) names four subjects and keeps them for five. An adviser may still choose to capture everything, because sorting messages by subject is harder than keeping them all; how archives handle that is in our email archiving comparison.
How long each record is kept
Most adviser records run on one clock. Paragraph (e)(1) keeps them for five years from the end of the fiscal year in which the last entry was made, and the first two of those years in an appropriate office of the adviser. The clock starts at the end of the fiscal year, not on the date of the record. By our reading, a record last touched in the first month of a fiscal year and one last touched in its final month can leave the file on the same day.
Year 0: End of the fiscal year during which the last entry was made
- In an appropriate office of the investment adviser2 years
- In an easily accessible place3 years
17 CFR 275.204-2(e)(1)
Seven kinds of record are carved out of (e)(1) and carry their own terms. Advertisements and the papers behind any performance figure count from the end of the fiscal year in which the ad was last disseminated, under (e)(3)(i). Pre-approvals of an access person's purchases count from the end of the fiscal year of the approval. The code of ethics, the compliance policies, the code acknowledgments and the access-person list are kept as each version or name that was in effect or current “within the past five years”. Apart from those seven, charters and minute books stay in the principal office until at least three years after the enterprise ends.
Adviser records and their periods (11 record classes)
| Record | Kept for | Counts from | Where | Rule |
|---|---|---|---|---|
| Written communications about advice, funds and orders | 5 years | The end of the fiscal year during which the last entry was made | An easily accessible place; the first 2 years in an appropriate office of the investment adviser | 204-2(a)(7), (e)(1) |
| Journals, ledgers, order memoranda and financial records | 5 years | The end of the fiscal year during which the last entry was made | An easily accessible place; the first 2 years in an appropriate office of the investment adviser | 204-2(a)(1)-(6), (e)(1) |
| Written agreements with clients | 5 years | The end of the fiscal year during which the last entry was made | An easily accessible place; the first 2 years in an appropriate office of the investment adviser | 204-2(a)(10), (e)(1) |
| Brochures, supplements and Form CRS | 5 years | The end of the fiscal year during which the last entry was made | An easily accessible place; the first 2 years in an appropriate office of the investment adviser | 204-2(a)(14), (e)(1) |
| Access-person reports and code violations | 5 years | The end of the fiscal year during which the last entry was made | An easily accessible place; the first 2 years in an appropriate office of the investment adviser | 204-2(a)(12)(ii), (a)(13)(i), (e)(1) |
| Records of the annual compliance review | 5 years | The end of the fiscal year during which the last entry was made | An easily accessible place; the first 2 years in an appropriate office of the investment adviser | 204-2(a)(17)(ii), (e)(1) |
| Advertisements and performance backup | 5 years | The end of the fiscal year during which the adviser last published or otherwise disseminated it | An easily accessible place; the first 2 years in an appropriate office of the investment adviser | 204-2(e)(3)(i) |
| Approvals of access persons' securities purchases | 5 years | The end of the fiscal year in which the approval was granted | Not stated | 204-2(a)(13)(iii) |
| Code of ethics and compliance policies (each version) | 5 years | The day the version stopped being in effect (by our reading of the rule) | Not stated | 204-2(a)(12)(i), (a)(17)(i) |
| Code acknowledgments and access-person lists | 5 years | The day the person stopped being a supervised or access person (by our reading of the rule) | Not stated | 204-2(a)(12)(iii), (a)(13)(ii) |
| Partnership articles, charters and minute books | 3 years | The termination of the enterprise | The principal office of the investment adviser | 204-2(e)(2) |
17 CFR 275.204-2(a)(12)-(13), (a)(17), (e)(1)-(3)
The same record classes, with the same periods, drive the books and records retention calculator. Enter the fiscal year-end and a date and it returns the keep-until date. The four rows below are its arithmetic on real-looking inputs.
Four records, four keep-until dates
| Record | Date entered | Clock starts | In the office through | Keep until at least |
|---|---|---|---|---|
| Client email recommending a rebalance | May 14, 2026 | December 31, 2026 | December 31, 2028 | December 31, 2031 |
| The same email at a firm with a June 30 year-end | August 15, 2026 | June 30, 2027 | June 30, 2029 | June 30, 2032 |
| A one-page performance flyer, last handed out | March 2, 2025 | December 31, 2025 | December 31, 2027 | December 31, 2030 |
| Approval of an access person's private placement | February 10, 2026 | December 31, 2026 | Not stated | December 31, 2031 |
17 CFR 275.204-2(e)(1), (e)(3)(i), (a)(13)(iii); dates by our reading of the rule
The rule does not define “appropriate office” or “easily accessible place”, and its text says nothing about an end date that falls on a weekend. Where your records sit in a cloud system, ask your compliance counsel how the two-year office window is met for your firm.
Electronic storage under 204-2(g)
Paragraph (g) lets an adviser keep every required record electronically, on conditions that come down to two questions: can the firm find one record, and can it hand that record over promptly in a usable form? The card below sets each condition beside the paper that shows it is met. The right-hand column is our suggestion, not the rule.
Each 204-2(g) condition, and what shows it is met
| Paragraph | What the rule asks | Evidence to keep |
|---|---|---|
| (g)(1) | Micrographic media, or electronic storage media “including any digital storage medium or system that meets the terms of this section” | A note of which systems hold which records |
| (g)(2)(i) | Records arranged and indexed to permit “easy location, access, and retrieval of any particular record” | A search that finds one client's records by name and date |
| (g)(2)(ii) | Provided promptly on request: a copy in the stored medium and format, a printout, and means to access, view and print | A tested export, and a named person who runs it |
| (g)(2)(iii) | A duplicate copy stored separately, for the time required for the original | Where the second copy lives, and proof it is current |
| (g)(3)(i) | Procedures to “reasonably safeguard them from loss, alteration, or destruction” | Written procedures covering backups, deletion and change logs |
| (g)(3)(ii) | Procedures to limit access to properly authorized personnel and the Commission | An access list, reviewed |
| (g)(3)(iii) | Procedures so a scanned paper original is complete, true and legible when retrieved | A scanning check, if you scan paper |
17 CFR 275.204-2(g)(1)-(3)
Vendor material written for broker-dealers often blurs the two. The broker-dealer side is explained in SEC Rule 17a-4 and WORM storage. To see which rule reaches each channel your firm uses, run the archiving requirements matcher.
Dual registrants and 204-2(h)
A firm registered as both an adviser and a broker-dealer keeps records under both rule sets. Paragraph (h)(1) speaks to a record kept under Exchange Act Rules 17a-3 and 17a-4:
That is the whole of what the rule says on the point. It does not list which broker-dealer records count as substantially the same, and it does not say which period governs a shared record. Settle both with your compliance counsel and write the answer into your procedures. The broker-dealer half is set out in FINRA Rule 4511: books and records for broker-dealers.
Closing the firm: 204-2(f)
The periods outlive the firm. An adviser that stops doing business “shall arrange for and be responsible for the preservation of the books and records” for the rest of each period. For a small firm selling its book or winding down, that means a written arrangement with whoever will hold the files, and a letter to the SEC sent before the doors close.
Building the file in a small firm
A one- or two-person adviser can meet the rule with a short written setup. These six steps are our suggestion for that setup, each tied to the paragraph it serves.
- 01
Map every place a record is made
Email, texts, the CRM, the client portal, paper. Write next to each the 204-2 paragraph it feeds. Client notes kept in a CRM are compared in our CRM comparison for advisers.
204-2(a)(7), (a)(10)
- 02
Write the fiscal year-end into the retention calendar
Every (e)(1) date counts from it. By our reading, a firm with a June year-end that copies a December calendar can release some records six months early.
204-2(e)(1)
- 03
Keep every version, not only the current one
Each version of the code of ethics and the compliance policies stays in the file while it is within the five-year window.
204-2(a)(12)(i), (a)(17)(i)
- 04
Test retrieval once a year
Pick a client and a date, then produce the copy, the printout and a way to view it, and time it. The annual review under Rule 206(4)-7 is a natural place to record the test.
204-2(g)(2)(ii)
- 05
Store the duplicate somewhere else
A second copy, kept separately, for as long as the original must be kept. Whether a backup inside the same system counts as stored separately is worth settling with your counsel.
204-2(g)(2)(iii)
- 06
Cover texting before the first client texts
If advice or orders arrive by text, those messages are (a)(7) records. Options are compared in our text message archiving comparison.
204-2(a)(7)
This guide explains the rule; it is not legal advice. Check your own records against the full text of Rule 204-2 on the eCFR with your compliance counsel.
Questions advisers ask about 204-2
Does Rule 204-2 require an adviser to keep every email?
It requires written communications on four subjects: advice and recommendations, funds or securities received or delivered, orders, and performance. The broker-dealer rule, 17a-4(b)(4), reaches all business communications. An adviser may still keep everything, because sorting is harder than keeping.
17 CFR 275.204-2(a)(7); 240.17a-4(b)(4)
Do advisers have to use WORM storage?
Not under Rule 204-2. Paragraph (g) requires indexing, prompt production, a separately stored duplicate, and procedures against loss, alteration or destruction. WORM and audit-trail storage are broker-dealer conditions under Rule 17a-4(f).
17 CFR 275.204-2(g)
When does the five-year period start?
At the end of the fiscal year during which the last entry was made on the record. By our reading, a December 31 year-end and a last entry in 2026 means at least December 31, 2031, the first two years in an appropriate office.
17 CFR 275.204-2(e)(1)
Is a client's text message a record?
If it is on one of the four (a)(7) subjects, yes. The rule names subjects, not channels, so a text about a trade is kept like a letter about one.
17 CFR 275.204-2(a)(7)
What happens to the records if we close the firm?
Before closing, the adviser must arrange for the records to be preserved for the rest of each period and tell the SEC in writing where they will be kept.
17 CFR 275.204-2(f)