Quick Answer
A business continuity plan must be in writing and reasonably designed to let the firm meet its existing customer obligations and address relationships with other broker-dealers and counterparties. The firm discloses to customers how it addresses a significant business disruption, including written disclosure at account opening.
Exam questions usually turn on what the plan covers, who owns it, and what the firm communicates.
What Must the Plan Address?
Each member must create and maintain a written business continuity plan. The plan identifies procedures relating to an emergency or a significant business disruption, so it stays a current working document rather than a one-time filing.
The plan's procedures must be reasonably designed to help the firm meet its existing customer obligations. The plan must also address existing relationships with other broker-dealers and counterparties.
Who Owns the Plan?
A designated member of senior management approves the plan. That person must also be a registered principal, and the same person reviews the plan.
Exam Tip: Gotchas
One person both approves and reviews the plan. The rule places the plan with a member of senior management who is also a registered principal, not with a committee.
What Must the Firm Disclose to Customers?
The firm discloses how its plan addresses a possible future significant business disruption and how it plans to respond to events of varying scope.
| Delivery method | When does it apply? |
|---|---|
| Written disclosure | At account opening. |
| Website posting | When the firm maintains a website. |
| Mailing | When a customer requests the disclosure. |
Exam Tip: Gotchas
Website posting does not replace the account-opening disclosure. A firm with a website must still provide written disclosure at account opening and mail it when requested.
Who Can Be an Emergency Contact?
The firm reports emergency-contact information to FINRA. The usual structure names two associated persons:
- At least one contact must be a member of senior management and a registered principal.
- If the second contact is not a registered principal, that person must be a senior manager who knows the firm's operations.
What Should You Check on Exam Day?
- Confirm that the firm creates and maintains the plan in writing. A plan written once and left alone does not satisfy the duty.
- Look for a senior-management registered principal as the plan's approver and reviewer.
- Require written customer disclosure at account opening, website posting when the firm has a website, and mailing when requested.
- Apply the usual two-associated-person contact structure.