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SEC proposes business continuity rule for investment advisers

The US Securities and Exchange Commission has proposed a new rule that would require registered investment advisers to adopt and implement written business continuity and transition plans. The proposed rule is designed to ensure that investment advisers have plans in place to address operational and other risks related to a significant disruption in the adviser’s operations in order to minimize client and investor harm. 

“While an adviser may not always be able to prevent significant disruptions to its operations, advance planning and preparation can help mitigate the effects of such disruptions and in some cases, minimize the likelihood of their occurrence, which is an objective of this rule,” said SEC Chair Mary Jo White. “This is the latest action in the Commission’s efforts to modernize and enhance regulatory safeguards for the asset management industry, which includes rules previously proposed that would modernize the information reported to the Commission and investors, enhance fund liquidity management, and strengthen the regulation of funds’ use of derivatives.”

The proposed rule would require an adviser’s business continuity plan to be based upon the particular risks associated with the adviser’s operations and include policies and procedures addressing the following specified components: maintenance of systems and protection of data; pre-arranged alternative physical locations; communication plans; review of third-party service providers; and plan of transition in the event the adviser is winding down or is unable to continue providing advisory services.
The proposed rule would also require advisers to review the adequacy and effectiveness of their business continuity plans at least annually and to retain certain related records.

In addition to the proposed rule, SEC staff issued related guidance addressing business continuity planning for registered investment companies, including the oversight of the operational capabilities of key fund service providers.

The proposal will be published on the SEC’s website and in the Federal Register for a 60-day comment period.

Read the proposed business continuity rule (PDF).

To submit a comment on the rule, use the SEC’s Internet submission form or send an e-mail to rule-comments@sec.gov



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Business continuity can be defined as 'the processes, procedures, decisions and activities to ensure that an organization can continue to function through an operational interruption'. Read more about the basics of business continuity here.

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