Live! From TD Ameritrade Institutional: Keep emergency plans updated, or face disastrous consequences from regulators

Compliance expert notes advisers should stress-test plans yearly and document everything

Jan 30, 2014 @ 9:36 am

By Liz Skinner

Financial advisory firms need to think seriously about disaster planning and should be conducting annual tests of their preparedness plans if they want to stay out of hot water with regulators.

Each year, registered investment advisers need to document the testing of their continuity plan, as well as any updates to these plans, Les Abromovitz, a senior consultant at National Compliance Services Inc., said at a pre-conference session at TD Ameritrade Institutional's national conference in Orlando on Wednesday.

Plan tests should show that everyone at the firm knows what they are going to do in the event of a disaster and they know where alternative business locations are, he said.

"Just having the plan isn't enough," Mr. Abromovitz said. "You have to show it's realistic and that you've thought about all the possibilities."

Adviser continuity plans came under increased scrutiny after Hurricane Sandy, when the impact on New York and New Jersey closed markets for two days. Some advisory firms in the Northeast remained closed for up to a week due to power outages and other communications and transportation challenges.

"Don't be afraid to say you made changes. SEC examiners like to see that you are trying to improve the plan," he said.

One adviser at the session said the Securities and Exchange Commission was impressed when she added contingencies for a pandemic that made everyone in the office ill.

"Be proactive, and don't just stock up on toilet paper before a storm," Mr. Abromovitz said.

Contact clients to see if they need any cash, move electrical equipment to a higher floor and consider getting a hotel room for key personnel and client data if a significant storm is coming, Mr. Abromovitz said.

"This is no time to roll the dice and hope you're missed by an approaching event," he said.

Business continuity documents also should include preparations for the death of key employees, Mr. Abromovitz said.

"It's important for examiners to know you have a succession plan in place, especially if you are a solo practitioner," he said. "A registered person must be available to take care of clients."

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