On June 28, 2016, the Securities and Exchange Commission proposed a new rule that would require registered investment advisers to adopt and implement written business continuity and transition plans. In announcing the proposed rule the SEC stated that: “The proposed rule is designed to ensure that investment advisers have plans in place to address operational and other risks related to a significant disruption in the adviser’s operations in order to minimize client and investor harm.”
The risks identified by the SEC include: business disruptions – whether temporary or permanent – such as a natural disaster, cyber-attack, technology failures, and the departure of key personnel.
The proposed rule also would require an adviser’s plan to include policies and procedures addressing the following specified components: maintenance of systems and protection of data; pre-arranged alternative physical locations; communication plans; review of third-party service providers; and plan of transition in the event the adviser is winding down or is unable to continue providing advisory services.
The proposed rule and rule amendments also would require advisers to review the adequacy and effectiveness of their plans at least annually and to retain certain related records.
In addition to the proposed rule, SEC staff issued related guidance addressing business continuity planning for registered investment companies, including the oversight of the operational capabilities of key fund service providers.
The proposed rule can be found by clicking here. Comments are due on or before September 6, 2016.