FINRA Announces Small Firm Emergency Partner Program

At the FINRA Fall Securities Conference in Scottsdale, AZ, a new, voluntary initiative was announced to help firms serve customers during business disruptions or emergencies. The initiative, an adjunct to a firm's Business Continuity Plan (BCP), is aimed at helping small firms in times of crisis. The Small Firm Emergency Partner Program (SFEPP) as it is known, was developed in consultation with an industry working group and the North American Securities Administrators Association (NASAA). It is designed to help two similar but geographically separated firms that use the same clearing firm establish a supportive partnership. In the event of a disaster, the impaired firm's customer accounts will be temporarily supported by the partner firm.

When introducing the concept at the conference, FINRA CEO Mary Schapiro cited the tragic events of 9/11, Hurricane Katrina, broad scale blackouts and other significant business disruptions, that negatively impacted small firms during the crisis. She noted, "The concept of SFEPP is simple: should a significant business disruption occur, a firm can rely on a pre-established partner firm, unaffected by the event, to step in temporarily and help its customers. The partner firms' common clearing firm would give the support firm access to the impaired firm's customer information until the impaired firm recovers."

Collaboration with NASAA was important to the program's launch. Because the program requires participants to partner with a firm distant from their own - typically in another state - the involvement of state securities regulators is crucial for issuing any necessary waivers during a significant business disruption. Applicable laws often differ from state to state. FINRA will notify NASAA of partnerships created through the program, and NASAA will work with state regulators to make any necessary arrangements for those partnerships to work.

"State securities regulators recognize the unique challenges facing investors and investment firms in the wake of a significant business disruption," said NASAA President and North Dakota Securities Commissioner Karen Tyler. "While we cannot predict a triggering event, we can work together to support the victims in times of crisis and mitigate uncertainty for investors as they recover. NASAA was pleased to collaborate with FINRA in the development of this important program and stands ready to support its implementation."

For firms wanting to participate in the program, FINRA has created tools and templates that are good starting points for analysis and implementation of the program, which will supplement a firms business continuity plan. All of these documents, and more detailed information about the SFEPP program, are available on FINRA's Web site at www.finra.org/sfepp.