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Staying Ahead in the Heart of the Storm

Monday, July 15, 2019

With Hurricane Florence barreling down on the east coast, it would be prudent for investment advisers across the country to take a step back and reexamine the measures they have put in place adequately address their needs in cases the worst should happen to them. What happens to your business should your primary place of business become uninhabitable? How would you ensure that your employees could continue to function? Most importantly, how would you safeguard your clients’ assets such a chaotic situation?

After Hurricane Harvey struck the Houston area in 2017, it became clear that many had failed to account for such a devastating scenario. The weak points in many advisers’ business continuity plans were exposed through a trial by fire, or in this case by water. Due to the heavy flooding in the Houston area, many advisers were unable to contact their clients and employees, conduct business from alternate locations, and many even lost crucial files necessary to quickly regain normal business functionality once the storm was over. Likely as a result of the failure of these prior plans, the SEC made business continuity plans one of their key exam priorities for 2018. So what plans should you have?

At a minimum, FINRA rule 4370 requires that a business continuity plan address:

  1. Data back-up and recovery (hard copy and electronic);
  2. All mission critical systems;
  3. Financial and operational assessments;
  4. Alternate communications between customers and the member;
  5. Alternate communications between the member and its employees;
  6. Alternate physical location of employees;
  7. Critical business constituent, bank, and counter-party impact;
  8. Regulatory reporting;
  9. Communications with regulators; and
  10. How the member will assure customers’ prompt access to their funds and securities in the event that the member determines that it is unable to continue its business.

One of the best ways to ensure a continuity of service and to safeguard your critical files is the use of cloud storage providers. The use of such a provider will allow you to access your mission critical files anywhere you have an internet connection. In addition, annual reviews and tests of your business continuity plan are vital to ensure that you are prepared for the worst-case scenario.

While you may or may not be in the path of Hurricane Florence, you never know when the next disaster will strike your area. Whether it is a hurricane, blizzard, or when a squirrel shuts down the NASDAQ (yes, that happened!), it is your responsibility to ensure that your clients are protected at all times. While you can never predict the time and place of the next disaster, you can, and must, prepare for it.


About Red Oak Compliance Solutions

Red Oak Compliance Solutions is the global advertising review software of choice in the financial services industry. It is a comprehensive suite of SEC 17A-4 compliant features that are 100% books and records compliant and provides clients with 35% faster approvals and 70% fewer touches or better. We also offer Smart Review(SM), which solves for the storage and maintenance of disclosures, helping firms reduce risk, decrease review times, and increase the speed of distribution of marketing materials. Smart Registration(SM) automates the licensing and registration management process to help reduce regulatory risk and time spent on manual processes. Overall, Red Oak allows firms to minimize risk, reduce costs, and increase compliance review process effectiveness and efficiencies.

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