OSC Reinforces Business Continuity Planning for Small Financial Firms

In an era where business disruptions can occur at any moment, the Ontario Securities Commission (OSC) has taken a steps to ensure the resilience of small financial firms. A recent reminder in the OSC Staff Notice 33-756 – Summary Report for Dealers, Advisers and Investment Fund Managers (OSC Staff Notice 33-756) emphasizes the critical importance of robust Business Continuity Plans (BCPs), particularly for firms with few registered individuals. But what does this mean for the industry, and why is it so crucial??

The Regulatory Landscape

The OSC's latest guidance, rooted in National Instrument 31-103 - Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), casts a wide net over the financial services sector's operational risk management:?

• Section 11.1 of NI 31-103 mandates firms to establish, maintain and apply policies and procedures that establish a system of controls and supervision.?

• A January 2024 email blast to Ultimate Designated Persons (UDP) and Chief Compliance Officers (CCO) reiterated the necessity of written BCPs, which include managing the impact of events such as the death, incapacitation or prolonged absence of key individuals.?

• This supports the Canadian Securities Administrators (CSA) Staff Notice 31-350 -Guidance on Small Firms Compliance and Regulatory Obligations (CSA Staff Notice 31-350) from May 2017, showing a consistent regulatory focus on BCPs for smaller firms.?

Practical Implications: The BCP Executor

One of the most intriguing aspects of the OSC's guidance is the concept of a BCP executor. For small firms, this role should be considered. But what does it entail??

• The BCP executor must be adequately trained to execute the BCP and authorized to act on behalf of the firm with third-party service providers and communicate with regulators.?

• For single-person firms, this might mean designating an external executor which may be a spouse, relative, legal counsel or even another registrant, who must have the knowledge, authority and qualification to carry out the role.?
• A written agreement should be in place to help ensure the BCP executor understands their responsibilities, including being familiar with the firm’s BCP and its business in order to wind down or temporarily manage the firm or transfer client accounts in the event the BCP is put into action.?

• This arrangement comes with its own set of challenges, including potential conflicts of interest and confidentiality concerns.?The BCP executor needs to understand securities legislation and aware of costs such as exemptive relief to act for another registrant firm.

Designating a BCP executor is like choosing a guardian for your business. It's a decision that requires trust, foresight, and meticulous planning.

Key Takeaways:?

As the financial landscape continues to evolve, small firms must adapt, or risk being left behind. The OSC's guidance on BCPs serves as a wake-up call:?

• BCPs are no longer optional — they are a regulatory requirement.?
• The role of BCP executor is crucial and requires careful consideration.?

In conclusion, a good BCP isn't just about compliance—it's about resilience. In today's financial world, that's not just smart business; it's essential.?

You can access the full OSC Staff Notice 33-756 Summary Report here: https://www.osc.ca/sites/default/files/2024-07/sn_33-756_rie-division-summary-report.pdf?

You can also access the CSA Staff Notice 31-350 here: CSA Staff Notice 31-350 Guidance on Small Firms Compliance and Regulatory Obligations (osc.ca)