Elizabeth Attanasio, CPA | ACI Partner
Broker-dealers spend considerable time and resources planning for what happens when critical systems go offline. Data is backed up, servers have failover capacity and physical locations have contingency sites. Far less attention, however, tends to go toward a related question: what happens when the person who runs the firm’s regulatory accounting function leaves?
At many small and mid-sized broker-dealers, a significant share of the firm’s regulatory and financial knowledge sits with one individual – often a single FinOp or a very lean team. Eventually, that person will move on. They may take a role at another firm, retire or simply decide it’s time for something new. Even a fully expected departure, like a planned retirement, can still leave a firm scrambling if the transition wasn’t planned for. And the departures a firm doesn’t see coming are the ones its continuity plan needs to be ready for most. A concentration of knowledge is efficient day to day, but it’s ultimately a meaningful gap in a firm’s business continuity planning.
FINRA’s Stance on Business Continuity Planning
FINRA Rule 4370 requires member firms to maintain a written Business Continuity Plan (BCP), review it at least annually and have the plan approved by a senior management registered principal, addressing ten minimum areas as applicable to the firm’s business – including mission-critical systems, data backup and recovery, financial and operational assessments, regulatory reporting and communications with regulators.
FINRA has been clear that these elements are not exhaustive. Its own guidance on effective BCP practices, drawn from its 2019 Report on Examination Findings and Observations, describes firms testing their BCPs annually to evaluate effectiveness “especially with respect to the functioning of mission-critical systems and processes, availability of key personnel, and access to physical contingency site location(s).”
The Dangers of a Single Point of Failure
When a firm relies on a single FinOp, that person is responsible for knowledge on all things related to the regulatory accounting and reporting process. Much of that institutional knowledge extends beyond what gets done to the why – nuance and context that can’t be fully captured in a procedures manual.
A useful exercise for any firm is to consider a simple scenario: If your FinOp gave notice tomorrow, could another qualified person slot in seamlessly for each of their individual responsibilities? Ask yourself: Who at the firm calculates net capital? Who prepares FOCUS reports? Who knows the regulatory filing calendar and understands the clearing reconciliation? Who has the necessary system access? If every answer points back to the same individual regardless of the situation, that’s a gap worth addressing.
Naming a backup FinOp on paper doesn’t, by itself, close that gap. That person needs familiarity with the firm’s specific business model and enough hands-on context to step in effectively when something unexpected occurs.
Addressing this gap also requires more than better documentation. It requires true redundancy: multiple qualified professionals who understand the work, shared visibility into regulatory deadlines, critical calculations and institutional knowledge that isn’t dependent on any single person’s calendar or inbox.
This matters even more as regulatory expectations continue to evolve. Business models change, new products introduce new capital considerations and FINRA and SEC regulatory guidance is updated regularly. A firm that depends on one person to stay current across all of it is exposed to a knowledge gap that can widen over time.
ACI’s Approach to Continuity
At ACI, we’ve always believed that no single person should be a firm’s only line of defense – and that regulatory accounting works better when knowledge belongs to a team. Our staff includes more than 20 CPAs and FinOps, more than 20 of whom have been with the firm for five years or longer, working across FinOp (Series 27) services, regulatory financial reporting and bookkeeping, clearing and carrying firm support, ICOC best practices, FINRA New Member applications and PCAOB audits, and FINRA/SEC exam support.
The value of this structure extends far beyond simply having a roster of people available for our clients. It’s having a team of true professionals who already know a client’s business inside and out, so that regulatory requirements are met without interruption – regardless of any one individual’s availability.
The next time your firm reviews its BCP, it’s worth asking not only whether your systems have adequate redundancy, but also whether your regulatory accounting function does from a personnel perspective. Don’t wait for an unexpected absence, a regulatory filing deadline or a FINRA examination to find out for you.
Accounting & Compliance International (ACI) helps broker-dealers build redundancy into their regulatory accounting function through a diverse set of accounting and reporting solutions. Reach out to learn how our deep bench can help strengthen your firm’s business continuity plan.