SEC May Require Advisors to Have Business Continuity Plans

The Securities and Exchange Commission is working on a rule that would require advisors to have a business continuity plan for business disruptions, such as when when they leave the firm or become incapacitated. 

SEC Chairman Mary Jo White noted the agency’s effort in a Dec. 11 speech in New York City (scroll down to “Improving Transition Planning and Stress Testing” heading), saying that SEC staff is developing a recommendation “to require investment advisers to create transition plans to prepare for a major disruption in their business. The process of creating such a plan in advance of an actual severe disruption in the adviser’s operations could better prepare advisers and their clients to deal with a transition and its attendant risks if one were required.” 

No timetable for issuing a proposed rule was provided, but the SEC’s fall 2014 regulatory agenda did include a new item, “Transition Plans for Investment Advisors,” noting that the SEC’s Division of Investment Management “is considering recommending that the Commission propose a new rule” requiring advisors to have “transition plans.” 

In most industries and most types of business, business continuity plans are widely used and generally accepted as a best practice. Can anyone deny that an advisory firm shouldn’t have one too? What’s your take? Share your thoughts in the comment box.