Business Continuity and Succession Planning
Investment advisers are required to maintain a written business continuity plan (BCP).
Required Elements
| Element | Details |
|---|---|
| Disaster recovery | Procedures for data backup, systems recovery, and alternative office arrangements |
| Succession planning | Plan for continuity of advisory services if the adviser becomes unable to serve (death, incapacity, retirement) |
| Client notification | Procedures for notifying clients of any disruption to advisory services |
| Key personnel | Identification of critical staff and their backup assignments |
| Regulatory communication | Plan for communicating with regulators during a disruption |
Annual Review
- The BCP must be reviewed and updated at least annually
- Must be updated after significant business changes
Succession Planning: Critical for Sole Practitioners
Particularly important for sole practitioners who have no automatic succession.
Think of it this way: A sole-practitioner investment adviser (IA) who becomes incapacitated with no succession plan leaves clients unable to access their accounts or receive advice. The adviser's fiduciary duty extends to protecting clients even after the adviser can no longer serve them.
Exam Tip: Gotchas
- A sole-practitioner IA who becomes incapacitated with no succession plan leaves clients locked out. Regulators specifically test awareness that succession planning is a regulatory requirement, not just a best practice.