Yesterday, the SEC proposed a new rule for registered investment advisors to adopt written business continuity and succession planning. The proposed rule is designed to ensure investment advisors have in place plans to address operational and other risks related to a significant disruption in your operations in order to minimize harm to your clients.
The proposed new rule states that business continuity and transition plans would assist advisors in preserving the continuity of the advisory services you offer in the event of business disruptions, either temporary or permanent, such as:
- Natural Disasters
- Cyber Attack
- Technology Failures
- Departure of Key Personnel
The proposed rule would require an advisor to include within your plan the particular risks associated with your specific business operations and address the following components:
- Maintenance of systems and protection of data
- Pre-arranged alternative physical locations
- Communications plans
- Review of third-party service providers
- Succession planning to include a plan of transition in the event the Advisor is winding down or unable to continue providing advisory services
As of this writing, this Rule is proposed and not yet final. Currently, the SEC has a 60 day comment period for this Rule. I would anticipate that we see a final rule either by the end of this year or early next year. Click here to review the Press Release.