Business Continuity and Disaster Recovery Plans Focused in New SEC Risk Alert

August 27, 2013: A new Risk Alert released by the Securities and Exchange Commission’s (SEC’s) Office of Compliance Inspections and Examinations (OCIE) details new considerations for investment advisers in establishing business continuity plans (BCPs) and disaster recovery plans. Focusing specifically on investment advisers, the Risk Alert was initiated, in part, by the large and devastating 2010 storm Hurricane Sandy, which forced the close of financial markets for two (2) days, and ultimately forced many investment advisers and other firms to re-evaluate current plans and policies for natural and man-made disasters.

The basis for the Risk Alert recommendations was derived from examinations performed on 40 advisers after the storm, in an effort to “assess their preparedness for and reaction to the storm” while also preparing “for future events that threaten to disrupt market operations.” The key findings by the SEC have been grouped into six (6) primary categories, including preparing for “widespread disruption”; planning for other locations; preparing plans for “key vendors”; telecommunications and technology issues, including how to acquire services and establishing plans for disasters; and reviewing and testing of plans for effectiveness and efficiency. While the Alert focuses more specifically on BCP and disaster recovery concerns for investment advisers – rather than covering the “broad array of firms” addressed under a joint advisory issued earlier in August by the OCIE, the Commodity Futures Trading Commission (CFTC) and the Financial Industry Regulatory Authority (FINRA) – the considerations included in the Alert may serve to represent the ways in which the greater regulatory environment may learn from the unfortunate and debilitating natural disasters of the past.

For more information on this topic, or for assistance on other compliance topics, please contact us at (619) 278-0020, or email us at info@corecls.com.