SEC Issues Business Continuity Guidance for Registered Investment Companies, Proposes Rule for Registered Investment Advisers

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SEC Issues Business Continuity Guidance for Registered Investment Companies, Proposes Rule for Registered Investment Advisers

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Schiff Hardin's Investment Management Group

On June 28, 2016, the Securities and Exchange Commission (SEC) proposed a new rule (Proposed Rule 206(4)-4) and certain rule amendments under the Investment Advisers Act of 1940 (Advisers Act).[1] The Proposed Rule would require SEC-registered investment advisers to adopt and implement written business continuity and transition plans (BCTP) that are reasonably designed to address operational and other risks related to a significant disruption in the investment adviser’s operations.

Concurrently, the staff of the SEC’s Division of Investment Management (the Staff) released a guidance update regarding business continuity planning for registered investment companies.[2]

In both the Proposing Rule Release and in the Guidance, it is noted that having a robust business continuity plan (BCP) in place is critical to any business’ ability to continue operations during, and to recover from, a significant disruption. While there are many similarities between the Guidance and Proposed Rule 206(4)-4, there are also some differences.

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[1] Release No. IA-4439: Adviser Business Continuity and Transitions Plans (the Proposing Rule Release).

[2] IM Guidance Update No. 2016-04: Business Continuity Planning for Registered Investment Companies (June 2016) (the Guidance).