Washington, D.C. — The National Association of Securities Dealers, Inc., announced today that its Board of Governors approved for comment a proposed rule that would require brokerage firms both to create and maintain a business continuity plan, and to supply the NASD with emergency contact information.
Following September 11, the NASD undertook an in-depth examination of the industry's recovery capability from significant business disruptions. It also looked at the need for assuring that all firms in the industry have a business continuity plan, without imposing a one-size-fits-all requirement for member firms.
To understand the ability of its members to respond to significant business disruptions, such as those resulting from September 11, the NASD surveyed 150 randomly selected firms plus an additional 120 of the largest NASD member firms. The survey found that while the largest firms were the best prepared, a majority of all firms back up their electronic data regularly and had plans that covered failures in hardware, software, power, and telecommunications.
Based on the survey and discussions with the SEC and GAO, the rule proposal will require a business continuity plan that addresses, at a minimum:
- Data back-up and recovery (hard copy and electronic)
- Mission critical systems
- Financial and operational assessments
- Alternate communications between customers and the firm
- Alternate communications between the firm and its employees
- Business constituent, bank and counter-party impact
- Regulatory reporting
- Communications with regulators
In addition to requiring that each NASD member have a business continuity plan, the rule proposal would require each member to maintain current key emergency contact information with the NASD for, including:
- Alternative communication plans for investors
- Location of books and records (including back-up locations)
- Clearance and settlement information
- Contact information for critical staff
- Identification of a designated contact person
- Identification of key banking relationships
"It is critical for all brokerage firms to have contingency plans to manage significant business disruptions. Having a clear, well-organized crisis protocol will allow our NASD members to resume business as quickly and efficiently, as possible," said Mary L. Schapiro, President of NASD Regulation, Inc.
To help manage this emergency contact requirement for member firms, and implement it expeditiously, the information would be collected through the Member Firm Contact Questionnaire on the NASD Regulation Web site.
The proposal will be published in a forthcoming Notice to Members, and will be available in its entirety at www.nasdr.com. Any final proposed rule must be filed with the SEC for approval.
The National Association of Securities Dealers, Inc. is the largest securities industry, self-regulatory organization in the United States. It is the parent organization of NASD Regulation, Inc.; the American Stock Exchange, LLC; and NASD Dispute Resolution, Inc. For more information about the NASD and its subsidiaries, please visit the following Web sites: www.nasd.com; www.nasdr.com; www.amex.com; www.nasdadr.com.