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More States Requiring Business Succession Plans

There is an idea spreading like wildfire in recent years, which could require businesses could eventually be required to have a formal continuity and succession plan in place to do business in most states. It's become such a popular idea that the North American Securities Administrators Association, or NASAA has already created a model rule that would require businesses to develop a plan that dealt with issues such as backup books and records, communications systems and plans for reaching clients, customers, employees and others in case of a major business disruption,


The NASAA model rule is a template published by the association that state securities administrators or legislatures can consider adopting, and they are confident that most state examiners will adopt it. Their push started in the wake of the disaster that followed Superstorm Sandy in 2012, when it was discovered that many businesses had no contingency plan in place for business continuity. Many administrators decided that, after a long string of natural disasters, one right after the other, it was time for states to adopt a more uniform set of rules.

probate-administration-attorney-stephen-n-scriber Under the NASAA framework, state-registered business advisors would be required to consider how they would respond to any number of business disruptions, whether they are relatively localized, such as after a fire or flood or the death or deaths of key personnel, or they affect a large geographic region, like Sandy. NASAA does stipulate that the model rule deals with extraordinary circumstances and is not intended to deal with continuity and succession issues that are part of the regular course of business.


NASAA's model rule, at a minimum, will require advisors to create and implement a plan for protecting, backing up and recovering books and records and for a predetermined system and method for communicating the circumstances of a significant business interruption to customers, regulators, employees and vendors, as well as to make plans for relocating the firm's main office should a disaster occur.


There will also need to be a succession plan in place that would stipulate which personnel would assume specific key responsibilities at the firm should key firm leaders die or become incapacitated.

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