Which of the following is a liability for brokerage firms regarding record keeping?

The correct choice reflects a significant liability for brokerage firms, which is the obligation to properly manage and protect personal identification information of the principals involved in closed transactions. Under regulations like the Gramm-Leach-Bliley Act and various state laws, brokers must safeguard consumers' personal information to prevent identity theft and ensure privacy. Failing to securely destroy personal IDs can lead to severe penalties and legal repercussions, emphasizing the importance of compliance in record keeping.

In contrast, while keeping all communication records indefinitely may seem responsible, it's not typically a liability in the same way; instead, it might be more about best practices. Only maintaining records for active transactions limits the firm's ability to respond to future inquiries or legal matters regarding past transactions, which is not compliant with industry standards. Similarly, storing financial records in a physical file is not inherently a liability, as firms may choose to store documents in different formats; however, the emphasis should always be on security and accessibility rather than the medium used.