Is your broker dealer ready for disaster? Across the United States, various areas are facing disasters – fires in Hawaii, hurricanes in the Southeast, and tornadoes across the Midwest. These are just a few of the situations where Business Continuity Plans (“BCPs”) are imperative to be in place and current. FINRA Rule 4370 requires every broker dealer to have written procedures in place in the event that the broker dealer cannot be available in a time of emergency. Any event that disrupts business as usual gives rise to the needs for BCPs. This includes natural disasters, power outages, even events such as the COVID 19 pandemic.
The Financial Industry Regulatory Authority (“FINRA”) has created a flexible rule for business continuity plans so that broker dealers can tailor their needs in accordance with the nature, size, and needs of the firm. However, there are several pieces of information that must be included but not limited to: having all data backed up, keeping communications open with clients, and making sure that clients have prompt access to their accounts.
The business continuity plan must be disclosed to the broker dealer’s customers, albeit when the client opens an account or whether it is posted on the firm’s website. Customers can also request a copy via mail. Providing your broker dealer’s customers with its BCP is not only required, but it also ensures the client that its broker dealer has appropriate measures in place to protect them. However, it must be noted that the rule does not require broker dealers to provide the BCPs in their entirety to the client. A summary of the business continuity plan will suffice if certain data is included such as back up phone numbers, clearing firm information, and other pertinent information.
Recent FINRA examinations have observed several challenges regarding business continuity plans. Several issues in broker dealer BCPs include outdated information, incorrect back up storage of data, and missing or incomplete systems. In order to avoid any penalties regarding your broker dealer’s BCPs, there are some best practices that your firm can put in place. Make sure that your broker dealer’s business continuity plan is always current with the most up to date information. If your firm changes vendors, moves, or makes various operational changes, be sure the BCP plan is updated. Another facet of making sure that your plans are current and accurate is to perform annual testing and incorporate the testing with your firm’s training.
If your broker dealer needs guidance on preparing a proper business continuity plan, please reach out to Master Compliance here and allow our team of professional compliance consultants to assist your broker dealer in preparing a proper business continuity plan so that your firm is not in a panic in time of emergency.
