Scottsdale, AZ — Financial Industry Regulatory Authority (FINRA) CEO Mary Schapiro today announced a new, voluntary emergency planning initiative aimed at helping small firms in times of crisis - the Small Firm Emergency Partner Program, which was developed in consultation with an industry working group and the North American Securities Administrators Association (NASAA). The program is designed to help two similar but geographically separated firms that use the same clearing firm establish a supportive partnership. In the event of a disaster, the impaired firm's customer accounts will be temporarily supported by the partner firm.
"In light of the tragic events of 9/11, Hurricane Katrina, broad scale blackouts and other significant business disruptions, this program will help small firms feel more confident that they can provide their customers with assistance during a crisis," said FINRA CEO Mary Schapiro. "The concept is simple: should a significant business disruption occur, a firm can rely on a pre-established partner firm, unaffected by the event, to step in temporarily and help its customers. The partner firms' common clearing firm would give the support firm access to the impaired firm's customer information until the impaired firm recovers."
Collaboration with NASAA was important to the program's launch. Because the program requires participants to partner with a firm distant from their own - typically in another state - the involvement of state securities regulators is crucial for issuing any necessary waivers during a significant business disruption. Applicable laws often differ from state to state. FINRA will notify NASAA of partnerships created through the program, and NASAA will work with state regulators to make any necessary arrangements for those partnerships to work.
"State securities regulators recognize the unique challenges facing investors and investment firms in the wake of a significant business disruption," said NASAA President and North Dakota Securities Commissioner Karen Tyler. "While we cannot predict a triggering event, we can work together to support the victims in times of crisis and mitigate uncertainty for investors as they recover. NASAA was pleased to collaborate with FINRA in the development of this important program and stands ready to support its implementation."
To facilitate participation in the program, FINRA has created a template for firms to use when drafting a partnership agreement. The template can be customized to fit the needs of each specific partnership agreement. FINRA has also posted an Overview and Guide and a FAQ document to guide firms through the entire process - including procedures for the affected, supporting or clearing firm to follow during a significant business disruption.
All of these documents, and more detailed information about the SFEPP program, are available on FINRA's Web site at www.finra.org/sfepp.
Industry representatives serving on the working group that helped design the program were Al Caiazzo, Managing Director and Chief Administrative Officer, First Clearing LLC of Richmond,VA; Ron DeCicco, Managing Director, Pershing LLC of Jersey City, NY; Jack Dardis, President of Broker Dealer NEXT Financial of Metairie, LA; Phil Dorsey, President and CEO, Dorsey and Company of New Orleans, LA; W. Dennis Ferguson, President, Sterne Agee Clearing of Boca Raton, FL; Ruth Hannenberg, Senior Managing Director, Mesirow Financial of Chicago, IL; Thomas Hollenbeck, Senior Vice President, National Financial Services LLC of Boston, MA; Jane Longendyck, Managing Director, Pershing LLC of Jersey City, NY; Philip V. Oppenheimer, President, Oppenheimer & Close, Inc. of New York, NY; G. Donald Steel, President, Planning Investment Company Inc. of Indianapolis, IN; and, Duncan F. Williams, President, Duncan-Williams Inc. of Memphis, TN.
FINRA is the largest non-governmental regulator for all securities firms doing business with the U.S. public. Created in 2007 through the consolidation of NASD and NYSE Member Regulation, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business-from registering and educating industry participants to examining securities firms; writing rules; enforcing those rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and registered firms.
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