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FINRA rule on business continuity plans left unchanged

On Behalf of | Jan 4, 2022 | Firm News

Following a review of its rule involving business continuity plans during the COVID-19 pandemic, the Financial Industry Regulatory Authority has decided to maintain the rule without change, ThinkAdvisor reports.

Under Rule 4370, FINRA members are required to have a continuity plan that identifies procedures relating to an emergency or significant business disruption and also provide FINRA with their emergency contact information that ensures a reliable means of contacting the firm.

The authority began a retrospective review of Rule 4370 in February 2019 to assess its overall effectiveness. A year later, early in the pandemic, FINRA encouraged each member firm to review their own business continuity plans in order to take pandemic preparedness into account. Then in December 2020, FINRA also sought feedback from member firms on lessons they had learned during the public health crisis, including how their operations and business models may have changed.

Based on those reviews that included extensive feedback from stakeholders, FINRA announced in Regulatory Notice 21-44 that it had arrived at its decision to leave Rule 4370 intact.

The authority reported that the majority of stakeholders indicated that the rule works well, and said that its flexible approach has been effective in making sure that firms of all sizes are prepared for a wide range of potential business disruptions.

In its summary of Regulatory Notice 21-44, FINRA noted, “During the pandemic, business continuity plans were implemented as member firms adapted swiftly to prioritize the health and safety of firm personnel and investors, while maintaining the public’s access to capital markets. FINRA also provided regulatory relief and guidance, as appropriate, to member firms, firm personnel and investors as they navigated through pandemic-related impacts.”

FINRA periodically reviews its rules to determine whether they are meeting their intended objectives by reasonably efficient means.

The Chicago securities law attorneys of Lewitas Hyman regularly monitor SEC, FINRA and other SRO rule-making activities to help ensure that our clients are aware of any new policies, while assisting them in implementing any recommended changes. Our clients include broker-dealers, RIAs, banks, investment companies and hedge funds, along with registered representatives and other individuals participating in the securities industry. If your firm is facing an investigation from a regulatory agency, please contact us at (888) 655 6002 or through our online contact form.