In response to the devastating effect of Hurricane Sandy which temporarily crippled U.S. equity and options markets in October 2012, the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) issued a Risk Alert on business continuity and disaster recovery planning for investment advisers. In the aftermath of Hurricane Sandy, the SEC reviewed the business continuity and disaster recovery plans of approximately 40 advisers who were affected by the storm “to assess their preparedness for and reaction to the storm.”

On August 16, 2013, a joint advisory was issued by OCIE, the CFTC’s Division of Swap Dealer and Intermediary Oversight, and the Financial Industry Regulatory Authority on business continuity and disaster recovery planning for a wide array of firms. The Risk Alert focuses exclusively on investment advisers and encourages advisers to review their business continuity plans in light of OCIE’s findings.  

The Risk Alert highlights the notable practices and weakness identified in the business continuity and disaster recovery plans and suggests improvements advisers could make to their plans in the following areas:

  • Preparation for widespread disruption
  • Planning for alternative locations
  • Preparedness of key vendors
  • Telecommunications services and technology
  • Communication plans
  • Reviewing and testing