Business Continuity and Disaster Recovery – Series 7 Exam

🛡️ Business Continuity and Disaster Recovery – Series 7 Exam Guide
Understanding FINRA’s Rules for Firm Preparedness

The Series 7 Exam tests not only your knowledge of products and client recommendations but also your understanding of regulatory requirements. One critical area is Business Continuity and Disaster Recovery (BCP/DRP)—plans that ensure broker-dealers can continue operations during significant disruptions.

📘 What Is a Business Continuity Plan (BCP)?

A Business Continuity Plan (BCP) is a written strategy that outlines how a firm will continue to operate in the event of:

• Natural disasters (earthquakes, floods)
• Cyberattacks or system failures
• Terrorist events or pandemics
• Any disruption to normal business processes

The goal is to minimize downtime and maintain service to clients and markets.

🔑 Key FINRA Requirements (Rule 4370)

• Written Plan Required: Every FINRA member firm must maintain a written BCP.
• Annual Review: The plan must be reviewed at least annually and updated as needed.
• Approval: A member of senior management must approve the plan.

🧾 What Must the Plan Include?

At minimum, the BCP must address:

1. Data Back-Up and Recovery
   Procedures for securing and restoring critical data.
2. Mission-Critical Systems
   Steps to ensure key systems (trading, record-keeping) stay operational.
3. Financial and Operational Assessments
   Evaluating the firm’s ability to continue critical functions.
4. Alternate Communications
   Methods for:
   • Communicating with clients
   • Communicating with employees
   • Communicating with regulators
5. Alternate Physical Locations
   Plans for relocating staff if primary offices are unusable.
6. Critical Counterparty Relationships
   Ensuring continued operations with:
   • Clearing firms
   • Banks
   • Transfer agents
7. Regulatory Reporting
   Procedures to keep up with required filings during disruptions.
8. Customer Access to Funds and Securities
   How clients will access their accounts even if the firm’s systems are down.

⚠️ Series 7 Exam Tips

• Know that FINRA does NOT dictate the exact details of the BCP—it only requires that the firm has one tailored to its size and scope.
• Understand the importance of data integrity and customer access as top priorities.
• Remember that the BCP must include communications with clients, employees, counterparties, and regulators.
• Expect scenario-based questions about what to do during a system outage or disaster.

🚨 Pandemic and Cybersecurity Considerations

In light of real-world events (COVID-19, ransomware attacks), firms are reminded to keep pandemic preparedness and cybersecurity risks central to their BCP strategies—these topics may also come up in exam updates.

🎓 Study Smarter with Us

At finra-exam-mastery.com, we include up-to-date regulatory modules, practice questions on BCP scenarios, and quizzes that reinforce key FINRA rules.

Know the rules. Protect the client. Pass the exam.