A client requests copies of all communications; the firm discards some, claiming they are irrelevant. Violation?

• A. Standard V.C Record Retention
• B. Standard IV.A Loyalty, Prudence, and Care
• C. Standard I.D Misconduct
• D. Standard II.A Material Nonpublic Information

Answer: (A)

Record retention obligations require a firm to preserve client communications that relate to investment analysis, recommendations, or actions, and to provide copies to clients on request. Even if some messages seem irrelevant at first glance, the standard is about preserving the records that document the decision-making process and the firm's communications with the client. Discarding communications on the basis of perceived irrelevance undermines transparency, hampers the client's ability to review what was proposed or decided, and can hinder regulatory or audit inquiries. Therefore, discarding them constitutes a violation of the retention standard.

The other standards address different duties. For example, loyalty and prudent care relate to putting the client’s interests first and exercising diligence, but they don’t specifically govern the preservation and disclosure of communications. Material nonpublic information concerns information asymmetry and disclosure, not record-keeping practices.