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SEC Asset Management Supervision: Transition Planning
In light of a recent announcement by SEC Chair Mary Jo White that the SEC plans to increase supervision of asset managers, Oyster Consulting has been providing a series of blogs on ways firms can mitigate risks, evaluate their services, and ensure policies and procedures are in place to protect their clients and themselves. While her focus was on large firms, it is important that small firms also listen to the themes and understand how to apply appropriate safeguards based on their unique business models.
Transition planning should be a key component of your business continuity plan, whether there is a disruption internally or externally. During an illness, or following the departure or even death of key personnel, an advisor will often face challenges serving the client’s needs. Having a plan to swiftly transfer asset management services to another qualified person is important. During a dissolution, it can be even more complex–you need to have a plan to help the clients move to another firm. Illiquid assets can create additional challenges, so make sure you consider your firm’s unique circumstances. A clear transition plan for an advisor could not only benefit the investor and protect your reputation; it is also becoming more of a regulatory focus.
External disruptions are also hard to predict; however, having a plan in place to quickly recover and resume business operations, and to safeguard employees and property is essential for the success and reputation of your firm.
What You Should Do:
Internal Disruptions: In order to ensure that the transference of funds from one advisor to another goes smoothly, it is important to have a transition process in place. Insurance can be an important part of preparing for key person disability and death. Not only will insurance reimburse the loss, the right policy can also protect the firm.
When evaluating or developing a transition plan, firms should also keep in mind any restrictions on an investor’s ability to access or move funds away from an advisor, imposed by illiquid assets or market conditions.
External Disruptions: Determining what damage may have been done during an external disruption is the first step. Firms should establish procedures for assessing employee and property safety, determining financial and operational status, protecting books and records, and establishing alternative methods for clients to transact business.
How Oyster Can Help:
Oyster professionals have first-hand experience identifying “mission critical” activities. Our solutions are practical and tailored to your firm’s business model. With Oyster’s assistance, a transition plan can be created that:
- Is tailored to your firm’s needs
- Is in line with Industry Best Practices
- Will allow you to continue to run your firm
- Will keep your business protected
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
Whether you are looking to change from self-clearing to fully-disclosed (or vice-versa), exploring your clearing options or starting a broker-dealer, Oyster can assist with the assessment, analysis, vendor selection and conversion processes.Download