A firm does not retain client communications and trade records for seven years. Violation?

• A. Standard II.A Material Nonpublic Information
• B. Standard V.C Record Retention
• C. Standard IV.D Performance Presentation
• D. Standard VI.B Priority of Transactions

Answer: (B)

The key idea here is that firms must keep client communications and trade records for a defined period. Under CFA Institute’s Standard V.C Record Retention, investment professionals are required to maintain complete and accessible records of client interactions, trade confirmations, and related correspondence for at least seven years. This requirement creates a reliable audit trail that supports accountability, regulatory compliance, and the ability to respond to disputes or inquiries. Not preserving these records for seven years makes it impossible to demonstrate how decisions were made, what information was shared, or how trades were handled, which is a violation of this standard.

Other standards address different issues, such as how material nonpublic information should be treated, how performance results are presented to clients, and the proper prioritization of client orders. These do not pertain to keeping records for a retention period, which is why this scenario aligns with Record Retention rather than those other areas.