NASAA Proposes Business Continuity Rule for State-Registered Advisers (with Lofchie Comment)

The North American Securities Administrators Association ("NASAA") announced it is seeking public comment on a proposed model rule and guidance requiring investment advisers to create and implement written procedures to address business continuity and succession planning under the Uniform Securities Act of 1956 and 2002.

According to NASAA, the responsibility to maintain business continuity, protect clients from interruptions in an investment adviser's business, and mitigate client harm in the event of a business interruption stems from an investment adviser's recordkeeping and fiduciary duty obligations. NASAA stated that the purpose of proposing both a model rule and guidance is to recognize the wide range of different business models of state-registered investment advisers, as well as to provide investment advisers with flexible guidance that can be used in developing an appropriate plan.

Comments are due by October 1, 2014.

Lofchie Comment: The SEC does not itself have an express business continuity rule applicable to its registered advisers (who would generally be much larger than state-registered advisers). That said, in its statements following Hurricane Sandy (see the SEC Risk Alert below), the SEC strongly implied that SEC-registered advisers were required to have business continuity procedures in order to comply with their various other regulatory obligations.

See: NASAA Proposal; NASAA Press Release. See also: SEC Risk Alert on Business Continuity.