FINRA Keeps Its Business Continuity Rule Intact

 Commentary  December 29, 2021 at 07:44 AM  Share & Print

The Financial Industry Regulatory Authority is leaving its business continuity rule intact after conducting a “Pandemic Review” of the rule.

The broker-dealer self-regulator said in a recent Regulatory Notice 21-44 that based on the review of Rule 4370 (Business Continuity Plans and Emergency Contact Information) and a Pandemic Review of the rule, “both of which involved extensive feedback from a wide range of internal and external stakeholders,” FINRA decided to maintain the rule as is.

The BCP Rule Review, as well as the related feedback received during the Pandemic Review, “confirmed the continuing value and effectiveness of Rule 4370 and its flexible, non-prescriptive approach, and so FINRA proposes to maintain the rule without change,” FINRA said.

In February 2019, FINRA published Regulatory Notice 19-06, launching a retrospective review of Rule 4370 to assess its effectiveness and efficiency. In March 2020, in the early stages of the COVID-19 pandemic and while the BCP Rule Review was still underway, FINRA published Regulatory Notice 20-08, encouraging each member firm to review its business continuity plan to consider pandemic preparedness and to review its emergency contacts to ensure that FINRA has a reliable means of contacting the firm.

The majority of those offering feedback indicated that Rule 4370 “works well and expressed the view that the rule’s flexible, non-prescriptive, and risk-based approach has been effective in ensuring firms of all sizes are prepared for potential business disruptions.”

Commenters also indicated that the rule “has been effective at ensuring member firm preparedness for a wide range of potential business disruptions,” FINRA stated.

Some stakeholders suggested incorporating further prescriptive requirements into the rule and a BCP testing requirement, while others suggested eliminating the requirement that a member firm provide the BCP disclosure to customers at account opening, and indicated that, as a general matter, additional guidance on effective practices would be welcome, FINRA explained.


European Compliance Association

European Compliance Association