Business Continuity Plan Template for Small Introducing Firms

[Firm Name] Business Continuity Plan (BCP)

This template is provided as an optional guide to small introducing firms to assist them in fulfilling their need to create and maintain business continuity plans (BCPs) and emergency contact person lists under NASD Rules 3510 and 3520. The template recognizes that many small introducing firms rely on parts of a clearing firm’s or other entity’s BCP for many of the mission critical functions of the introducing firm. Nothing in this template creates any new requirements on clearing firms or other entities, or new requirements for BCPs. Following this template does not guarantee compliance with or create any safe harbor with respect to FINRA Rules, the federal securities laws, or state laws. The obligation to develop a BCP is not a “one-size-fits-all” requirement, and you must tailor your plan to fit your particular firm’s situation. NASD Rule 3510(c) requires that members relying on another entity for elements of their business continuity plan or mission critical systems must address that relationship in their plan. This template is written for small introducing firms that use a clearing firm and includes sample language regarding the nature of that particular relationship only. If your firm conducts a different type of business (e.g., sells only mutual funds), the template must be modified to describe the entities that you rely on and the nature of those relationships. The language contained in this template is provided as a helpful starting point to walk you through developing your firm’s plan. It is highly unlikely that the language of this template standing alone will fully fit your firm’s business situation. In this regard, you must customize the language of this template to reflect your firm's activities and issues. If you have prepared a plan in a different format, you may wish to attach the appropriate sections of that plan to this template to confirm that you have addressed the individual elements. Critical Elements There are 10 critical elements of a BCP specified in NASD Rule 3510. Each firm need only address the elements applicable to its business, but if you do not include a specified element in your firm’s plan, your plan must document why it is not included: (1) Data back-up and recovery (hard copy and electronic); (2) All mission critical systems; (3) Financial and operational assessments;

email] and [name. phone number. the second emergency contact should be an individual. I. phone number. If your firm is a single employee sole proprietorship.org. GAO-03-251 and GAO-03-414 (Feb. and our Executive Representative will review them within 17 business days of the end of each quarter. www. . Material in italics provides instructions. www. TEXT EXAMPLE: Our firm’s two emergency contact persons are: [name.fsscc. TEXT EXAMPLES are provided to give you sample language that you can modify to create your firm’s plan. (6) Alternate physical location of employees.identify second person's relationship to the firm if not a registered principal of the firm]. “Report on Potential Terrorist Attacks: Additional Actions Needed to Better Prepare Critical Financial Market Participants. (8) Regulatory reporting. If there is only one registered principal at your firm.sec. (5) Alternate communications between the member and its employees. the relevant rules.gao.org. and business continuity planning Web sites.” Report Nos. General guidance and background: Please see NASD Notice to Members (NtM) 04-37. accountant or clearing firm contact person.gov. (9) Communications with regulators. www. (7) Critical business constituents. These names will be updated in the event of a material change. The Securities and Exchange Commission/Board of Governors of the Federal Reserve System/Office of the Comptroller of the Currency Joint White Paper on Business Continuity Planning http://www.(4) Alternate communications between customers and the member. www.asp. General Accounting Office.com/business_continuity. Keep in mind that the above-listed 10 elements are not exhaustive.uk/business/businesscont/ and www. you should address other key areas for your plan to be complete and thorough. such as your firm’s attorney. and counter-party impact.business-continuity.gov/. either registered with another firm or non-registered.org. www.org/ncs.finra. These names must be updated in the event of a material change and reviewed by the firm’s Executive Representative quarterly within 17 business days of the end of each quarter. and other resources that you can use to develop your firm’s plan. Emergency Contact Persons Identify your firm’s two emergency contact persons. including http://www. Each emergency contact person must be a member of senior management and a registered principal. based on your firm’s business and operations. banks. e-mail . These names must also be reported to FINRA through FINRA’s Contact System (formerly known as the NASD Member Firm Contact Questionnaire or NMFCQ) at www.thebci.gov/). 2003) (available at http://www.com. who has knowledge of your firm’s business operations. and (10) How the member will assure customers’ prompt access to their funds and securities in the event that the member determines that it is unable to continue its business.sia.com.bsi-global. the second emergency contact person should be another firm employee.londonprepared.drii.

In the event that we determine we are unable to continue our business. Approval and Execution Authority [Name. For more information on FINRA’s secure online location for firms to back up their business continuity plans. we do not hold customer funds or securities. Internal SBDs affect only our firm’s ability to communicate and do business. title]. II. e-mail continuityrepository@finra. protecting all of the firm’s books and records. This service is optional and offered to members for a reasonable fee. Plan Location and Access Our firm will maintain copies of its BCP plan and the annual reviews. internal and external. TEXT EXAMPLE: Our firm’s policy is to respond to a Significant Business Disruption (SBD) by safeguarding employees’ lives and firm property. such as a terrorist attack. Business Description State the types of business that your firm conducts. Significant Business Disruptions (SBDs) Our plan anticipates two kinds of SBDs. title] has the authority to execute this BCP. and derivative securities.] compares them. We accept and enter orders. All transactions are sent to our clearing firm. regional disruption. and the changes that have been made to it for inspection. especially on the capabilities of our clearing firm. a registered principal. or a wide-scale. where the plan is stored. [Name. Our firm is an introducing firm and does not perform any type of clearing function for itself or others. including your firm’s obligation to grant customers access to their funds and securities in the event of a significant business disruption. An electronic copy of our plan is located on [server name] in the [file/folder name] [and in the BCP Repository Service offered by FINRA]. External SBDs prevent the operation of the securities markets or a number of firms. Firm Policy State your firm’s objectives for business continuity in the face of both internal and external significant business disruptions (SBDs). Our response to an external SBD relies more heavily on other organizations and systems.Rule: NASD Rule 3520. Furthermore. fixed income. A. B. which [executes our orders. a city flood. we will assure customers prompt access to their funds and securities. C. and allowing our customers to transact business. TEXT EXAMPLE: Our firm conducts business in equity.org. and how to access the plan. This policy should be given to all employees. such as a fire in our building. is responsible for approving the plan and for conducting the required annual review. III. making a financial and operational assessment. State who has the authority to execute the plan. . quickly recovering and resuming operations.

A. bus. boat. Our firm services only retail customers [OR retail and institutional customers]. TEXT EXAMPLE: Our Firm has offices located in Location #1 and Location #2.allocates them. V. Customers’ Access to Funds and Securities State that your firm does not maintain custody of customers’ funds or securities and how your firm will make them available to customers in the event of an SBD. we will move our staff from affected offices to the closest of our unaffected office locations. address. phone number. Rule: NASD Rule 3510(c)(6). take place at each location. car. Our clearing firm also maintains our customers’ accounts. We engage in order taking and entry at this location. Its main telephone number is [insert]. B. plane [other]. Our employees may travel to that office by means of [insert all that apply] foot. Describe any . TEXT EXAMPLE: In the event of an SBD. car. train. Our employees may travel to that office by means of [insert all that apply] foot. Web site] IV. e-mail address. Our clearing firm has also given us the following alternative contact in the event it cannot be reached: [name. Office Location #1 Our Location #1 Office is located at [address]. State the entity at which such funds and securities are held. phone number. and delivers funds and securities. can grant customers access to them. Alternative Physical Location(s) of Employees List the alternate physical location(s) your firm will use in the event an SBD affects the operation of your office locations. plane [other]. Its main telephone number is [insert]. Web site] and our contact person at that clearing firm is [name. e-mail address. as defined below. Office Location #2 Our Location #2 Office is located at [address]. bus. clears and settles them. phone number. and state the means of transportation that employees may use to reach that facility. We do not engage in any private placements. address. Our clearing firm is [name. If none of our other office locations is available to receive those staff. Office Locations List the locations of all of your offices. subway. State also which mission critical systems. We engage in order taking and entry at this location. subway. e-mail]. and how your firm will facilitate access to them. address]. (if different). registered and unregistered. we will move them to [name of firm. Its main telephone number is [insert]. train. boat. VI.

[insert name].relationship between your firm’s ability to grant customer access to funds and securities and Securities Investor Protection Corporation (SIPC) regulations on the disbursement of funds and securities.C. Our firm maintains its back-up hard copy books and records at [other address].S. microfilm. Securities Exchange Act Rule 15c3-1. TEXT EXAMPLE: Our firm maintains its primary hard copy books and records and its electronic records at [address]. [Name. We back up our records every [time period].]. TEXT EXAMPLE: Our firm does not maintain custody of customers’ funds or securities. we will continue operations from our back-up site or an alternate location. title. may be the same as hard copy back-up site]. describe how your firm will recover data in the event of an SBD. title. etc. VII. our registered persons will take customer orders or instructions and contact our clearing firm on their behalf. and keeps a copy at [other address. For the loss of electronic records. If our primary site is inoperable. Our firm backs up its paper records by copying and taking them to our back-up site. In addition. we will physically recover them from our back-up site. SIPC may seek to appoint a trustee to disburse our assets to customers. 78eee (2003). Data Back-Up and Recovery (Hard Copy and Electronic) Identify the location of your firm’s primary books and records (hard copy and electronic) and the location of your firm’s back-up books and records (hard copy and electronic). phone number] is responsible for the maintenance of these back-up books and records. which are maintained at our clearing firm. Describe how your firm backs up its data. if telephone service is available. such as new account forms. Rules: NASD Rule 3510(a). Our firm maintains the following document types and forms that are not transmitted to our clearing firm: [List document types and forms.] [Name. The firm will make this information available to customers through its disclosure policy. If SIPC determines that we are unable to meet our obligations to our customers or if our liabilities exceed our assets in violation of Securities Exchange Act Rule 15c3-1. 15 U. The firm backs up its electronic records daily [or other time period] by [describe process]. In the event of an internal or external SBD that causes the loss of our paper records. and if our Web access is available. We will assist SIPC and the trustee by providing our books and records identifying customer accounts subject to SIPC regulation [and insert any additional procedures]. we will either physically recover the storage media or electronically recover data from . our firm will post on our Web site that customers may access their funds and securities by contacting [insert contact information]. phone number] is responsible for the maintenance of these books and records. These records are [paper copies. In the event of an internal or external SBD. etc.

If we cannot remedy a capital deficiency. VIII. employees. In addition. and regulators. (c)(8) & (f)(2). telephone voice mail. continue operations from our back-up site or an alternate location. financial. Rules: NASD Rules 3510(c)(3) & (f)(2). Mission Critical Systems . A.]. TEXT EXAMPLE: In the event of an SBD. we will immediately identify what means will permit us to communicate with our customers. Although the effects of an SBD will determine the means of alternative communication. The firm also may face credit risk (where its investments may erode from the lack of liquidity in the broader market). and quickly make such an assessment in connection with an SBD. IX. critical banks. we will file appropriate notices with our regulators and immediately take appropriate steps. including [insert procedures]. Rules: NASD Rules 3510(c)(3). critical business constituents. or. TEXT EXAMPLE: In the event of an SBD. critical banks. Rule: NASD Rule 3510(c)(1). Operational Risk Operational risk includes the firm’s ability to maintain communications with customers and to retrieve key activity records through its mission critical systems. which would also hinder the ability of the firm’s counter-parties to fulfill their obligations. the communications options we will employ will include [our Web site. secure e-mail. if our primary site is inoperable. we will request additional financing from our bank or other credit sources to fulfill our obligations to our customers and clients. we will retrieve our key activity records as described in the section above.our back-up site. Your firm should periodically assess the changes in these exposures. Data Back-Up and Recovery (Hard Copy and Electronic). we will determine the value and liquidity of our investments and other assets to evaluate our ability to continue to fund our operations and remain in capital compliance. critical counter-parties. If we determine that we may be unable to meet our obligations to those counter-parties or otherwise continue to fund our operations. Financial and Operational Assessments Describe your firm’s procedures to identify changes in its operational. B. and credit risk exposures in the event of an SBD. We will contact our clearing firm. and investors to apprise them of our financial status. etc. Financial and Credit Risk Financial risk involves the firm’s ability to fund operations and maintain adequate financing and sufficient capital.

g. access to customer accounts. and the delivery of funds and securities. execution. Our clearing firm provides.] comparison. TEXT EXAMPLE: Our firm’s “mission critical systems” are those that ensure prompt and accurate processing of securities transactions.g..Describe your firm’s mission critical systems and whether your firm or your clearing firm has responsibility for them. the maintenance of customer accounts. scope of disruption. preferably. comparison. allocation. and review your clearing firm’s capabilities to perform their mission critical functions for your firm. these systems include: [list systems names and their functions]. allocation. out of region] site. within 4 hours]. We have primary responsibility for establishing and maintaining our business relationships with our customers and have sole responsibility for our mission critical functions of order taking [and] entry [and execution]. or is otherwise unable to provide access to such services.. the maintenance of customer accounts. entry. Recovery refers to the restoration of clearing and settlement activities after a wide-scale disruption. A. however. Our clearing firm represents that it operates a back-up operating facility in a geographically separate area with the capability to conduct the same volume of business as its primary site. through contract. and the delivery of funds and securities. including order taking. hard and fast deadlines that must be met in every emergency situation. clearance and settlement of securities transactions. resumption refers to the capacity to accept and process new transactions and payments after a wide-scale disruption. Our clearing firm contract provides that our clearing firm will maintain a business continuity plan and the capacity to execute that plan. More specifically. Our clearing firm has the following SBD recovery time and resumption objectives: recovery time period of [e. within the same business day]. If we reasonably determine that our clearing firm has not or cannot put its plan in place quickly enough to meet our needs. Our clearing firm represents that it will advise us of any material changes to its plan that might affect our ability to maintain our business [and presented us with an executive summary of its plan. They are not. which is attached]. and it has confirmed that it tests its back-up arrangements every time period]. access to customer accounts. Our clearing firm has also confirmed the effectiveness of its back-up arrangements to recover from a wide scale disruption by testing [. and resumption time of [e. clearance and settlement of securities transactions. our clearing firm represents that it will assist us in seeking services from an alternative source. Order Taking . and various external factors surrounding a disruption. Recovery-time objectives provide concrete goals to plan for and test against. In the event our clearing firm executes its plan. and status of critical infrastructure—particularly telecommunications—can affect actual recovery times. Our clearing firm represents that it backs up our records at a remote [or. Our Firm’s Mission Critical Systems 1. it represents that it will notify us of such execution and provide us equal access to services as its other customers. such as time of day. the [execution.

we would [describe how you would provide those services in the event of an external SBD]. we would [describe your execution procedures in the event of an external SBD]. we will enter and send records to our clearing firm by the fastest alternative means available. and deliver the order to the clearing firm by the fastest means available when it resumes operations. In the event of an internal SBD. If necessary. In the event of an internal SBD. If your firm does not execute orders. TEXT EXAMPLE: Currently. we would [describe your execution procedures in the event of an internal SBD]. 4. Alternatively. describe your procedures if an SBD prevents your firm from executing orders received from customers. either internal or external. during an internal SBD.Describe how your firm will handle order taking in the event of an SBD. we will inform our customers when communications become available to tell them what alternatives they have to send their orders to us. TEXT EXAMPLE: We currently execute orders by [describe current execution procedures]. our firm enters orders by recording them on paper and electronically and sending them to our clearing firm electronically or telephonically. Mission Critical Systems Provided by Our Clearing Firm. B. we will continue to take orders through any of these methods that are available and reliable. we will advise our customers to place orders directly with our clearing firm at [insert]. During an SBD. In the event of an external SBD. In the event of an internal SBD. we may need to refer our customers to deal directly with our clearing firm for order entry. which include [insert]. and in addition. under its BCP. Customers will be informed of alternatives by [insert method]. as communications permit. we can expect [services] within [time]. 3. We have contacted [name of system(s)] and were told that. we would [describe how you would provide those services in the event of an internal SBD]. include order execution in the list of mission critical systems that your clearing firm provides to your firm in the next section. Mission Critical Systems Provided by Our Clearing Firm . In the event of an external SBD. In the event of an external SBD. our firm receives orders from customers via [insert all that apply] telephone/fax/e-mail/our Web site at [insert URL]/in person visits by the customer. Order Entry Describe your firm’s procedures if an SBD prevents it from entering orders received from customers. 2. TEXT EXAMPLE: Currently. we will maintain the order in electronic or paper format. We place customer orders through [insert name of system]. Other Services Currently Provided to Customers TEXT EXAMPLE: In addition to those services listed above in this section we also [describe any other services you provide customers]. In addition. Order Execution If your firm executes orders.

Person C. we will assess which means of communication are still available to us. e-mail.g. We will also employ a call tree so that senior management can reach all employees quickly during an SBD. Rules: NASD Rules 3510(c) & (f)(1). by contract. and use the means closest in speed and form (written or oral) to the means that we have used in the past to communicate with the other party. and access to customer accounts. fax. In the event of an SBD.. Person G. TEXT EXAMPLE: We now communicate with our employees using [insert all that apply] the telephone. We have identified persons. Employees. e-mail. noted below. our Web site. For example. who live near each other and may reach each other in person: The person to invoke use of the call tree is: [insert name] Caller [e. on our clearing firm to provide [order execution].S. Employees Describe the alternate means of communications that your firm will use to communicate with its employees in the event of an SBD. and Regulators A. we will call them on the telephone and follow up where a record is needed with paper copy in the U.Describe the arrangements you have with your clearing firm to provide other mission critical systems.] . TEXT EXAMPLE: Our firm relies. U. TEXT EXAMPLE: We now communicate with our customers using [insert all that apply] the telephone. mail. order allocation. In the event of an SBD. B. Customers Describe the alternate means of communications that your firm will use to communicate with its customers in the event of an SBD. Person F. Alternate Communications Between the Firm and Customers. and in person visits at our firm or at the other’s location. Person A Person C Call Recipients Person B. we will assess which means of communication are still available to us. mail. and the maintenance of customer accounts. Rule: NASD Rule 3510(c)(4).S. if we have communicated with a party by e-mail but the Internet is unavailable. order comparison. and use the means closest in speed and form (written or oral) to the means that we have used in the past to communicate with the other party. and in person. Person D Person E. The call tree includes all staff home and office phone numbers. delivery of funds and securities. X.

C. supplier’s name.Rule: NASD Rule 3510(c)(5). XI. We communicate with our regulators using [insert all that apply] the telephone. address. In the event of an SBD. U. address and phone number and any alternative supplier’s name. Rule: NASD Rule 3510(c)(9). and Counter-Parties Describe your firm’s procedures to identify changes in the impact an SBD will have on its relationship with its critical business constituents. and counter-parties.] Rules: NASD Rule 3510(c)(7). [or we have entered into a supplemental contract with certain critical business constituents to provide such services. and how it will deal with those impacts.S. banks. Regulators Describe the alternate means of communications that your firm will use to communicate with its regulators in the event of an SBD. B. Banks .] Our major suppliers are: [list service/product. e-mail. The alternative suppliers are disclosed below. Banks. and determined the extent to which we can continue our business relationship with them in light of the internal or external SBD. A. TEXT EXAMPLE: We are currently members of the following SROs: [insert list]. fax. we will assess which means of communication are still available to us. and phone number. We will quickly establish alternative arrangements if a business constituent can no longer provide the needed goods or services when we need them because of a SBD to them or our firm. mail. and use the means closest in speed and form (written or oral) to the means that we have used in the past to communicate with the other party. and in person. Critical Business Constituents. such as vendors providing us critical services). Business constituents TEXT EXAMPLE: We have contacted our critical business constituents (businesses with which we have an ongoing commercial relationship in support of our operating activities.

XIII. and electronically using fax. Our disclosure statement is attached. XII. e-mail. Rules: NASD Rule 3510(c)(7). phone number. and contact]. to determine if we will be able to carry out our transactions with them in light of the internal or external SBD. Rules: NASD Rules 3510(a) &(c)(7). We also [post the disclosure statement on our Web site and] mail it to customers upon request. . such as other broker-dealers or institutional customers. TEXT EXAMPLE: Our firm is subject to regulation by: [insert list of federal and state securities regulators. and other regulators to determine which means of filing are still available to us. and contact]. we will seek alternative financing immediately from [bank/lender name. In the event of an SBD. address. such as annually]. and phone numbers].S. TEXT EXAMPLE: We provide in writing a BCP disclosure statement to customers at account opening [list other times of disclosure if applicable. If our banks and other lenders are unable to provide the financing. we will work with our clearing firm or contact those counter-parties directly to make alternative arrangements to complete those transactions as soon as possible. FINRA. address. and the Internet.TEXT EXAMPLE: We have contacted our banks and lenders to determine if they can continue to provide the financing that we will need in light of the internal or external SBD. [Your disclosure statement need not disclose the specific location of any back-up facilities. we will continue to file required reports using the communication means available to us. any proprietary information contained in the . phone number. Disclosure of Business Continuity Plan Describe how your firm discloses its business continuity planning to customers. C. address. The bank maintaining our Proprietary Account of Introducing Brokers/Dealers (PAIB account) is [list bank name. Rule: NASD Rule 3510(c)(8). In the event that we cannot contact our regulators. [Insert regulator contact information]. mail. we will check with the SEC. Where the transactions cannot be completed.] We now file reports with our regulators using paper copies in the U. The bank maintaining our operating account is: [list bank name. Attach the current version of your disclosure statement. and use the means closest in speed and form (written or oral) to our previous filing method. Regulatory Reporting Describe how your firm will file its regulatory reports in the event of an SBD. Counter-Parties TEXT EXAMPLE: We have contacted our critical counter-parties.

Signed: Title: Date: _______________________________ _______________________________ _______________________________ . You should also include information about your firm's clearing firm or other similar entity. estimates of how long it expects to take to recover from business disruptions of varying intensities (such as a disruption to the building. or the whole region) and resume business. the business district. You should disclose the existence of back-up facilities and arrangements. based on the BCP. if applicable. or the parties with whom the firm has back-up arrangements. You should include a summary statement of the operating areas covered in the BCP and the firm's plans for business operation recovery. if so. if any. our firm will review this BCP annually. Senior Manager Approval Approve the firm’s BCP by signing below. TEXT EXAMPLE: Our firm will update this plan whenever we have a material change to our operations. XV. to modify it for any changes in our operations.BCP. It should address how your firm would react to events of varying scope.] Rule: NASD Rule 3510(e). business or location or to those of our clearing firm. the city. XIV. structure. TEXT EXAMPLE: I have approved this Business Continuity Plan as reasonably designed to enable our firm to meet its obligations to customers in the event of an SBD. or location or those of our clearing firm. provide a statement of whether your firm intends to stay in business and. on [date]. business. You should include alternative telephone number(s). structure. and clearing firm information. Updates and Annual Review Describe your firm’s plan update policy and annual review of your BCP. In addition. Rule: NASD Rule 3510(d). but you are not required to disclose specific back-up locations to your customers. Web site information. for example. Rule: NASD Rule 3510(b). and the services that firm or entity may provide to customers in the event of a significant business disruption. It should.

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