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    of 5

    Systems Maintenance and Data Protection

    The Basics
    Advisors would be required to indicate their plans to maintain critical operations and
    systems. This includes how they would protect, backup and recover important data,
    including client records.

    Tips

    Identify and prioritize critical functions, operations and systems.


    Consider alternatives and redundancies that would help maintain operations
    in the event of a significant business disruption. Do this before any significant
    business disruption in order to be able to better react during the emergency
    situation.
    When identifying which operations and systems are critical, consider which
    are used for prompt and accurate processing of portfolio securities
    transactions, on behalf of clients. This includes the management, trading,
    allocation, clearance and settlement of such transactions.
    Create contingency plans related to key personnel. This should account for
    both permanent and short-term situations. For example, if an individual
    become unavailable during a weather-related emergency, another person
    should be able to perform her duties.
    When creating a data protection, backup and recovery plan, address both
    hard copy and electronic backup, when needed. Also be sure to include an
    inventory of key documents, including the location and description of each
    item, and a list of the advisor's service providers' relationships.
    Consider and address what could be impacted as a result of a cyber-attack.
    Consider whether the departure of key employees could trigger contractual
    obligations with clients, investors or counterparties.

    Initial Cost, Per Advisor


    $1,000 to $750,000

    Annual Cost, Per Advisor


    $250 to $187,500

    Request for Comment


    Not indicated

    Backup Sites
    The Basics
    Each advisor's business continuity plan should include a pre-arranged physical
    location for its offices and employees.

    Tips

    Consider the geographical diversity of offices or remote sites and employees.


    Also consider how employees will access systems, technology and resources
    needed to continue operations in the alternative locations.
    Ensure that the satellite location would not be similarly affected by the
    disruption. The site should also allow remote access by employees so that the
    advisor could continue to have access to the facilities and systems necessary
    to carry on business

    Initial Cost, Per Advisor


    $5,000 to $500,000

    Annual Cost, Per Advisor


    $1,250 to $125,000

    Request for Comment

    Should the SEC require that the plan include an alternative location that's a
    specified distance away from the primary location?

    Communications Plans
    The Basics
    The business continuity plan should include details about how the advisor will
    communicate with clients, employees, service providers and regulators. It should
    address how all parties involved with critical aspects of operations will be notified,
    and should outline the methods, systems, backup plans and protocols. It should also
    address employee training so that everybody understands their specific duties.

    Tips

    If employees are not told that a disruption has occurred, the entire business
    continuity plan ''will likely fail,'' writes the SEC.
    The communication plan should dictate how clients will be made aware of
    and updated about significant business disruptions that impact them.
    It should also indicate how a service provider will be notified, as well as how
    the entities will communicate with one another, clients and investors.
    Updates for clients can include periodic updates to websites and consumerservice lines.

    Initial Cost, Per Advisor


    $0 to $5,000

    Annual Cost, Per Advisor


    $0 to $1,250

    Request for Comment

    Should the SEC require that an advisor's communication plan extends to


    investors of certain types of pooled investments? If so, which types? How
    should ''investors'' be defined for each type?

    Review Third-Party Services


    The Basics
    The continuity and transition plans should include identification and assessment of
    third-party services that are critical to the advisor's operations and client services
    provided to clients, and the third-party vendors who support or conduct the
    essential functions of those services.

    Tips

    Consider a variety of factors when prioritizing which service providers should


    be deemed critical. These factors can include whether the advisor relies on
    the service for its day-to-day operations, and whether backup processes or
    multiple providers exist. They should also consider whether the service
    provider is maintaining critical records, or has the ability to access personally
    identifiable information.
    Critical service providers include those that provide services related to
    portfolio management, the custody of client assets, trade execution and

    related processing, pricing, client servicing or recordkeeping and regulatory


    reporting.
    Once an advisor identifies its critical service providers, review and assess
    how these service providers plan to maintain business continuity during times
    of distress.
    Assess whether service providers that operate critical programs have
    contingency plans for events of service disruptions.

    Initial Cost, Per Advisor


    $5,000 to $50,000

    Annual Cost, Per Advisor


    $1,250 to $12,500

    Request for Comment

    Should the SEC require an advisor to have policies and procedures that
    address the identification, assessment and review of critical third-party
    vendors that the advisor arranges or oversees for its clients?

    Transition Planning
    The Basics
    The transition plan should include details for how advisor's will wind down their
    business, or transition it to another advisor. The plan would address how the advisor
    intends to safeguard, transfer or distribute client assets during the transition. It
    would also address how the advisor would facilitate the ''prompt generation'' of any
    client-specific information necessary to transition each account, and would also
    include information regarding the advisor's corporate governance structure, identify
    material financial resources available to the advisor and factor in applicable laws or
    contractual obligation governing the advisor and its clients.

    Tips

    Work to mitigate any potential negative effects on clients or advisors.


    Ensure that the plan accounts for transitions that occur in both normal and
    stressed market conditions.

    Consider each type of advisory client, any contractual obligations and any
    relevant regulations.
    Address how the advisor will safeguard, transfer or distribute client assets.
    Include the unique attributes of each type of client, including RIAs, private
    funds and SMAs, and how the advisor plans to transfer accurate client
    information to other advisors and their service providers.
    Provide organizational charts and other ownership and management
    information. This should include the identities and contact information for key
    personnel, and the identities of the affiliates whose dissolution or distress
    could have a material impact on the advisors operations
    Initial Cost, Per Advisor
    Not available
    Annual Cost, Per Advisor
    Not available
    Request for Comment

    Should only certain advisors be required to adopt and implement the


    transition plan component of the rule? Will the transition component not be
    beneficial for any subsets of advisors?
    Should the SEC adopt a more prescriptive rule that calls for a more specific
    transition plan, similar to the ''Living Wills'' required by the Federal Reserve
    Board and the FDIC for large banks and systemically important non-bank
    entities? If so, what, and what specifically should the rule require?

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