Securities Litigation

This week FINRA issued Reg. Notice 20-08 on “Pandemic-Related Business Continuity Planning, Guidance and Regulatory Relief.”

FINRA urges member firms to review and update their Business Continuity Plans (“BCP”) to ensure they fit the effect of an infectious disease pandemic on each firm’s operations and risk profile.  See Rule 4370 (annual BCP review requires an update on any material change).

FINRA anticipates that firms may need to implement remote work arrangements (whether telecommuting or working from firm alternate or recovery sites).  In those instances, FINRA encourages flexible and creative methods of continuing to provide reasonable supervision and compliance (recognizing that on-site branch inspections may not be appropriate in the near term).

FINRA encourages firms, however, to test their remote-work arrangements first, before implementing them.

FINRA also will suspend the requirement to update Forms U-4 on location information for temporary relocations due to COVID-19.

The Notice points out that cyber-security risks are likely to increase alongside remote-work solutions and encourages a concomitant focus on cyber updates, education, and currency of solutions.

FINRA expects that firms will maintain closer contacts with their FINRA liaison during this period, provide prompt notification of any material relocations, and request any needed extensions.

Finally, FINRA reminds firms to be transparent and communicative with their customers regarding these issues.

Reg. Notice 20-08 is here.

FINRA last issued similar guidance in 2009 regarding the H1N1 “swine flu” outbreak, here.