US Securities and Exchange Commission Proposes Requiring Investment Advisers to Adopt Business Continuity and Transition Plans

The SEC proposed a rule that would require registered investment advisers to adopt and implement written business continuity and transition plans. The new rule requires investment advisers to prepare in advance for significant disruptions in their operations—whether temporary or permanent (such as a natural disaster, cyber-attack, technology failures, etc.)—thereby mitigating client and investor harm.

The proposed rule would require an adviser’s plan to be based on the particular risks associated with its operations, but also include policies and procedures addressing specified components, such as the maintenance of systems and protection of data, pre-arranged alternative physical locations, communication plans and review of third-party service providers. The rule would allow advisers to tailor the detail of their plans to the complexity of their business operations.

SEC Chair Mary Jo White commented that this rule was “the latest action in the Commission’s efforts to modernize and enhance regulatory safeguards for the asset management industry.” In addition to the proposed rule, the SEC staff issued related guidance addressing business continuity planning for registered investment companies, including oversight of operational capabilities of key fund service providers.

View the SEC press release.

View the proposed rule.

View SEC staff guidance.