New Regulatory Guidance for Business Continuity Planning

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As a result of recent natural disasters, a number of the regulators that oversee the securities industry have jointly issued guidance that will set new standards for the business continuity or disaster recovery plans (BCPs) of broker-dealers and investment advisers. The LeGaye Law Firm has issued article on the advisory, including suggested action items related to assessing their business continuity planning process in light of the new standards.

Daniel LeGaye

Daniel LeGaye, Attorney at The LeGaye Law Firm P.C., anticipates that the latest guidance provided by regulators will have significant impact on broker-dealers and financial advisers as the advisory, while not a rule, has raised the compliance bar.

Based upon the wide spread devastation caused by Hurricane Sandy, and the numerous other natural disasters such as tornadoes, flooding and wildfires that have occurred in the past few years, the Securities and Exchange Commission’s (“SEC”), the Financial Industry Regulatory Authority (“FINRA”), and the Commodity Futures Trading Commission (“CFTC”) jointly reviewed BCPs, targeting firms with a significant market presence. As a result of that joint review, FINRA, the SEC and CFTC issued a Business Continuity Planning Advisory FINRA Notice to Members 13-25.

Broker-dealers became subject to the BCP requirements when FINRA (formerly NASD) issued FINRA Rule 4730, (formerly the NASD Rule 3500 series). Michael Schaps, Director of Regulatory Compliance at The LeGaye Law Firm P.C., stated that “this advisory represents the first major guidance issued by FINRA, the SEC and or the CFTC since BCP’s were mandated by the SEC for investment advisers and broker-dealers in 2004”.

The advisory compiled a summary of what the regulators learned in their BCP review and encourages firms to review their BCPs and implement best practices to improve responses to, and reduction of recovery time after significant large-scale events. It was noted that the impact of a business disruption is going to be based upon the severity of the event, and that BCPs need to take into account the firm’s location, size, type of business and need for contact with customers and regulators. In preparation of a significant business disruption, both broker-dealers and investment advisers should consider reviewing their current BCPs, as applicable, to determine if their BCPs address the best practice considerations set forth in the advisory.

Daniel LeGaye, Attorney at The LeGaye Law Firm P.C., anticipates "… that the latest guidance provided by regulators will have significant impact on broker-dealers and financial advisers as the advisory, while not a rule, has raised the compliance bar, as firms will be judged after a significant disruption as to the adequacy of their BCPs.”

For a copy of the complete article, including the suggested action items related to how to address the best practices considerations set forth in the advisory, please click here.

About The LeGaye Law Firm
We bring knowledge and experience to address the complex legal considerations facing broker-dealers and investment advisors with respect to their registration, regulatory and compliance challenges. To that end, our professionals have extensive experience with the SEC, FINRA, NFA, and state securities regulators. To find out more about The LeGaye Law Firm, click here to visit our web-site.

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Daniel E. LeGaye

Michael R. Schaps
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