FINRA offers the example of a small firm whose chief compliance officer and Financial and Operations Principal (FinOp) unexpectedly died during a weekend.
“The firm had a succession plan in place that, among other things, promptly notified FINRA of the situation and engaged a recruiting firm to hire a new CCO and FinOp,” the reg notice states. “As a result of the firm’s proactive planning for these events, the firm successfully continued operations without any interruptions in service to its customers.”
The notice points out the benefits as well as common types of succession plans. It also provides an overview of related FINRA rules and administrative processes and includes questions to consider when developing and implementing succession plans.
Business Continuity Plans Required
For instance, FINRA notes that while its rules do not require that firms or reps adopt separate succession plans, member firms are required to adopt business continuity plans, or BCPs.
FINRA Rule 4370 (Business Continuity Plans and Emergency Contact Information) requires member firms to create, maintain, review at least annually, and update upon any material change a written BCP identifying procedures relating to an emergency or significant business disruption.