The SEC, the Financial Industry Regulatory Authority (“FINRA”), and the Commodity Futures Trading Commission (the “CFTC”) recently contacted several firms impacted by Hurricane Sandy to understand how their operations (including trading, customer relations, financial and regulatory obligations, and technology) were affected. Specific emphasis was given to the firms’ implementation of their Business Continuity Plans and/or Disaster Recover Policies and how such plans addressed the disruptions caused by Hurricane Sandy in an effort to assist industry members in preparing for future events that have the ability to disrupt market operations.
After these discussions, the SEC, FINRA and the CFTC jointly released an Advisory Statement encouraging firms to review their Business Continuity Plans and/or Disaster Recover Policies to implement the lessons learned from Hurricane Sandy. Specifically, the statement recommends that firms address (1) widespread disruption due to natural disasters, (2) the use of alternative locations and geographic diversity, (3) vendor relationships and communications, (4) technology considerations, (5) investor and client communication plans, (6) regulatory compliance with respect to their Business Continuity Plans and/or Disaster Recover Policies and (7) adequate review and testing or such policies and procedures. In addition, the statement advises firms to consider the possibility of widespread lack of telecommunications, transportation, electricity, office space, fuel and water when reviewing their Business Continuity Plans and/or Disaster Recover Policies, to utilize backup centers and remote sites in different geographic regions and to contract with multiple telecommunication providers to prevent widespread communication disruptions.
Firms should review their Business Continuity Plans and/or Disaster Recover Policies to ensure they address the various considerations and possibilities to ensure a smooth recovery in the event their business operations are disrupted.
The full text of the advisory statement is available here.