Pandemic-Related Business Continuity Planning, Guidance and Regulatory Relief

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Treliant Takeaway:

Treliant knows business continuity.  If you need assistance with assessing and managing your disaster recovery risk, or determining the impact of this guidance on your firm’s activities, Treliant can help.

Article Highlights:

On March 9, 2020, the Financial Industry Regulatory Authority (FINRA) released Regulatory Notice 20-08 on Business Continuity Planning (BCP). With this notice, FINRA reminded member firms to consider pandemics in the business continuity planning that is required under FINRA Rule 4370.

Regulatory Notice 20-08 reminds member firms to take the following steps:

  1. Review BCPs to ensure the wide range of potential effects of a pandemic are adequately addressed.
  2. Members should contact their FINRA Risk Monitoring Analyst to discuss activation of BCPs or related issues, such as disruption of business operations.
  3. Ensure the supervisory system reasonably covers staff engaged in social distancing through alternative work arrangements such as remote offices, telework, or backup or recovery offices during a pandemic.
  4. Consider testing broad use of alternative work arrangements prior to activating the member’s BCP to ensure connectivity to critical firm systems and adequacy of remote connectivity.
  5. Consider the increased risk of cyber events as part of pandemic preparedness, particularly with respect to alternative work arrangements.
  6. Ensure customers have access to funds and securities during business disruptions.
  7. Maintain adequate contact with customers, regulators, and counterparties.
  8. Exercise diligence in customer authentication during periods of relocation or call routing and provide heightened supervision of affected accounts.

To assist in pandemic preparedness, FINRA is temporarily suspending the requirement to maintain updated Form U4 information regarding office of employment address for registered persons who temporarily relocate due to COVID-19. FINRA is also temporarily waiving the requirement to submit Form BR for newly opened temporary office locations or space-sharing arrangements established due to COVID-19. However, a member firm that relocates personnel to a temporary location that is not registered as a branch office or regular non-branch location should use its best efforts to provide written notification to its FINRA Risk Monitoring Analyst as soon as possible. Firms are encouraged to contact their FINRA Risk Monitoring Analyst regarding any difficulty making timely regulatory filings, responding to regulatory inquiries, submitting required data to FINRA, or completing qualifications exams or continuing education requirements.

As a reminder, Rule 4370(c) requires BCPs to cover:

  1. Data backup and recovery (hard copy and electronic);
  2. All mission critical systems;
  3. Financial and operational assessments;
  4. Alternate communications between customers and the member;
  5. Alternate communications between the member and its employees;
  6. Alternate physical location of employees;
  7. Critical business constituent, bank, and counter-party impact;
  8. Regulatory reporting;
  9. Communications with regulators; and
  10. How the member will assure customers’ prompt access to their funds and securities in the event that the member determines that it is unable to continue its business.