The Securities and Exchange Commission (SEC) has proposed a new rule that would require registered investment advisers to adopt written business continuity and transition plans to preserve the continuity of services in case of business disruptions.
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The regulator said that implementing these plans would help advisers minimise disruptions to service in case of various business disruptions including a natural disaster, cyber-attack, technology failures, or key staff departure.
The plan should cover policies to address maintenance of systems and protection of data, pre-arranged alternative physical locations, communication plans, and review of third-party service providers.
Moreover, advisers should have a plan of transition if they are winding down or are unable to offer advisory services.
Advisors would be allowed to tailor their plans based upon the complexity of their business operations and risks associated with the business, the regulator said.
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By GlobalDataUnder the proposed rule, advisers should also annually review the effectiveness of their plans as well as retain certain related records.
SEC chair Mary Jo White said: "While an adviser may not always be able to prevent significant disruptions to its operations, advance planning and preparation can help mitigate the effects of such disruptions and in some cases, minimize the likelihood of their occurrence, which is an objective of this rule.
"This is the latest action in the commission’s efforts to modernize and enhance regulatory safeguards for the asset management industry, which includes rules previously proposed that would modernize the information reported to the commission and investors, enhance fund liquidity management, and strengthen the regulation of funds’ use of derivatives."
