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Take time for continuity planning

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The solo practitioner needs to consider and reevaluate their firms’ business continuity plan. FINRA rules control how these plans should be created and ultimately distributed to your customers. The purpose of the FINRA requirement, found in Rule 3510(e), is to assist customers in making educated decisions about whether to place their funds and securities at a specific firm. Firms are required to disclose to their customers how your BCP addresses the possibility of a future significant business disruption and how you plan to respond to such events.

So what is the best way to start or create a plan? First, your plan should be designed to meet your specific needs. You need to think about things such as structure, business location, product offerings and business focus. Your plan should be tailored to the business and needs of your firm. Take a hard look at where your business is located, how many support staff you have in the location, how is your clients’ information delivered to you? How would you handle your customers’ needs in the event of a serious business disruption? You should try to provide specific scenarios of varying severity (e.g., a firm-only business disruption, a disruption to a single building, a disruption to a business district, a city-wide disruption, and a regional disruption). Next you would want to discuss your intentions to continue business during the stated scenario and, if so, how long it could take for you to recover. Obviously you want to discuss how you intend to respond to any disruption.

Say you conduct most of your business with outside insurance companies or mutual funds. You’re your firm have to meet the requirements of BCP? Yes. Your plan should consider what the firm’s primary responsibilities are, but also include information on the entities that customers would need to contact to access their assets and funds should your office be out of order. You should also provide your customers with any information they might need in connection with assets held away from your company.

It is a good idea to state in your plan that your BCP is subject to ongoing modification and to provide your customers a way to find those modifications. Next you should designate at least one supervisor to be responsible to review and approve (update) your plan at least on an annual basis. This review should be in writing, dated and signed off on by the supervisor and saved in an easily accessible area for five years.

When must the plan be delivered to your customer? The disclosure must be sent to customers at account opening, annually, it should be posted on your Web site (if you have one), and it must be mailed to all customers upon request. It is also a good idea to mail it out to your customers upon making any changes.

In addition you should check with your State to see if there is any electronic registration requirement. For instance, under FINRA rule 3520, your firm is required to register the name of two emergency contacts through FINRA’s Contact System (formerly known as the NASD Member Firm Contact Questionnaire.) Say you are a sole proprietorship, who could be the second contact? If you employ any registered personal you could register those persons as the second emergency contact person under Rule 3520.

What if your business has a significant disruption that makes it impossible for you to continue? Do you have to stay in business? No. However, under Rule 3510(c)(9), your BCP must address how you will assure customers’ prompt access to their funds and securities in the event that you determine that your firm is unable to continue its business.

You owe it to your customers to be able to help them retrieve their information in the event your business has a problem. Common sense goes a long way in this area, but there are specific rules that must be followed. Consider backing up all your client data offsite at least once a week, (nightly if possible), and be able to access this information from remote locations. If you do not have a way to access client records from remote locations you might want to consider looking into vendors that can provide that service.

David Hollander, a finalist for Senior Market Advisor’s 2008 Advisor of the Year, is an elder law attorney in Oakland, Calif. and president of Responses and questions can be sent to [email protected].


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