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Regulation and Compliance > Federal Regulation > FINRA

Graying Brokerage Industry Prompts Need for Succession Plans: FINRA

By Melanie Waddell

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The Financial Industry Regulatory Authority is encouraging registered representatives to have a succession plan in place to plan for unexpected life events and as more and more brokers are nearing retirement.

Brokerage industry demographics indicate that an increasing number of reps are at or approaching traditional retirement age, FINRA states in a just-released Regulatory Notice.

As of December 2021, 16.3% of reps were 60 and older; 8.2% were 65 and older; and 3.82% were 70 and older.

The percentage of reps in each of these age brackets has increased in recent years, FINRA states.

FINRA lays out in the notice the benefits of “proactive succession planning.”

Succession planning can benefit customers, member firms and reps themselves, FINRA states.

FINRA offers the example of a small firm whose chief compliance officer and Financial and Operations Principal (FinOp) unexpectedly died during a weekend.

“The firm had a succession plan in place that, among other things, promptly notified FINRA of the situation and engaged a recruiting firm to hire a new CCO and FinOp,” the reg notice states. “As a result of the firm’s proactive planning for these events, the firm successfully continued operations without any interruptions in service to its customers.”

The notice points out the benefits as well as common types of succession plans. It also provides an overview of related FINRA rules and administrative processes and includes questions to consider when developing and implementing succession plans.

Business Continuity Plans Required

For instance, FINRA notes that while its rules do not require that firms or reps adopt separate succession plans, member firms are required to adopt business continuity plans, or BCPs.

FINRA Rule 4370 (Business Continuity Plans and Emergency Contact Information) requires member firms to create, maintain, review at least annually, and update upon any material change a written BCP identifying procedures relating to an emergency or significant business disruption.

Melanie Waddell

@Think_MelanieW

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