Business Continuity Planning (BCP)
FINRA requires firms to create and maintain written business continuity plans (BCPs) relating to an emergency or significant business disruption. Rule 4370—FINRA's emergency preparedness rule — spells out the required BCP procedures. A firm's BCP must be appropriate to the scale and scope of its business.
BCP procedures must be reasonably designed so the firm can meet its existing obligations to customers. A firm must disclose to its customers how its BCP addresses the possibility of a significant business disruption and how the firms plan to respond to events of varying scope. This BCP disclosure must be made in writing to customers when they open their account, posted on the firm's website if they maintain one and mailed to customers upon request. The BCP also must be made available promptly to FINRA staff if requested.
What to Include in a Business Continuity Plan
FINRA Rule 4370 gives a firm flexibility in designing a BCP. It may be tailored to the size and needs of the firm, but at a minimum it must include the following elements:
- Data backup and recovery (hard copy and electronic);
- All mission critical systems;
- Financial and operational assessments;
- Alternate communications between customers and the firm, and between the firm and employees;
- Alternate physical location of employees;
- Critical business constituent, bank, and counterparty impact;
- Regulatory reporting;
- Communications with regulators; and
- How the firm will assure customers' prompt access to their funds and securities in the event that the firm determines that it is unable to continue its business.
A firm must address the elements to the extent applicable and necessary. If any of the elements is not applicable, the firm's BCP must document the rationale for not including the element in its plan. If a firm relies on another entity for any one of the elements or any mission critical system, the firm's BCP must address this relationship.
FINRA provides the following optional tools to assist firms in in fulfilling their need to create and maintain business continuity plans (BCPs) and emergency contact person lists under FINRA Rule 4370.
Communicating with FINRA
Firms must provide FINRA with emergency contact information. In addition, if a firm is unable to contact FINRA during a significant business disruption through its usual contact, such as the District Office or direct dial number, please call FINRA's Gateway Call Center at (301) 590-6500. This number will be rerouted in the event of a business disruption at FINRA's primary call center, so that the firm will be able to reach an operator or receive recorded instructions. This information also will be posted on www.finra.org.
In instances when data communications are disrupted, firms are responsible for retaining data until it can be transmitted to FINRA.
FINRA's Business Continuity Plan
FINRA's BCP specifies how we will respond to events that significantly disrupt our business and addresses safeguarding our employees and property; insuring data back up and recovery; restoring mission-critical systems as well as critical regulatory and operational activities; alternative communications with investors, member firms, associated persons, and other regulators; and assuring all of our constituents a prompt response to their needs. We plan to continue in business, transfer operations to alternate sites as needed, and maintain as much transparency to our constituents as possible during a disruption. FINRA's business continuity plan is updated and tested regularly, and it is provided to the SEC as part of its oversight of FINRA.
FINRA's Office of General Counsel (OGC) staff provides broker-dealers, attorneys, registered representatives, investors and other interested parties with interpretative guidance relating to FINRA’s rules. Please see Interpreting the Rules for more information.
- FINRA Requests Comment on the Effectiveness and Efficiency of Its Rule on Business Continuity Plans and Emergency Contact Information
- FINRA Updates Designation Criteria to Require Firms Reporting U.S. Treasury Securities to TRACE to Participate in FINRA's Business Continuity/Disaster Recovery Testing
- Guidance to Members Affected by Hurricane Harvey
- FINRA Waives Certain Trade Reporting and Compliance Engine (TRACE) Late Trade Reporting Fees in Connection With Hurricane Sandy
- Guidance to Members Affected by Hurricane Sandy
- Guidance for Firms Potentially Affected by Hurricane Isaac
- SEC Approval and Effective Dates for New Consolidated FINRA Rules
- FINRA Provides Guidance on Pandemic Preparedness
- Guidance for Firms Affected by the California Wildfires
- Member Business Continuity Experiences regarding Hurricanes Katrina and Rita
- NASD Requests Comment on Regulatory Relief that Should Be Granted in Response to a Possible Pandemic or Other Major Business Disruption
- Guidance to Members Affected by Hurricane Katrina
- SEC Approves Rules Requiring Members to Create Business Continuity Plans and Provide Emergency Contact Information
- The NASD Seeks Comment On Proposed Rules Relating To Member Firm Business Continuity Plans And Emergency Contact Information
- Targeted Examination LetterIn coordination with the SEC and the CFTC, we are conducting a review of the impact of Hurricane Sandy on firms’ operations and their ability to conduct business at a time when business continuity plans were enacted.November 01, 2012
- Report / StudyIn 2009 FINRA conducted a voluntary firm survey to determine preparedness for a pandemic in light of current events involving influenza A (H1N1). This survey continues FINRA's efforts to assist firms with business continuity planning by facilitating the exchange of information.
- Compliance ToolsFINRA is providing a template as an optional guide to small introducing firms to assist them in fulfilling their need to create and maintain business continuity plans (BCPs) and emergency contact person lists under NASD Rules 3510 and 3520.
1. What is the purpose of the disclosure requirement in FINRA Rule 4370(e)?
- Investor AlertFinancial fraud routinely follows on the heels of disaster. Hurricane Harvey and the historic flooding it left it its wake is no exception. We are issuing this Alert to warn investors that investment scams may come your way touting stocks and other investments with the promise of huge gains in the wake of Harvey. This Investor Alert explains how to spot and protect yourself from potential investment scams.