The recent events of the coronavirus pandemic have caused a great dislocation of office workers and many securities professionals have been ordered to shelter in place or remain at home. What if you are trying to reach your broker regarding your account? With the stock market in turmoil, how does this affect you as a brokerage customer?

During an emergency or pandemic, each broker-dealer is required to notify its customers as to how they may contact their financial advisor, broker or the brokerage firm. There are business continuity rules in place during a pandemic requiring securities firms to protect their customers. Under special guidance put in place during the COVID-19 pandemic, your brokerage firm is required to put a notice on its website indicating to all of it affected customers who they may contact concerning the 1) execution of trades; 2) their accounts; and 3) access to funds or securities in their accounts. 

The Financial Industry Regulatory Authority (“FINRA”) requires that each member securities firm have a Business Continuity Plan (“BCP”) which sets forth how the firm can be contacted by its customers during an emergency like the coronavirus pandemic. FINRA’s recent regulatory guidance, for communicating with customers during the pandemic states:

Communicating With Customers

FINRA understands that member firms may experience significantly increased customer call volumes or online account usage during a pandemic (e.g., due to significant market movements), which may cause temporary operational challenges. Member firms are encouraged to review their BCPs regarding communicating with customers and ensuring customer access to funds and securities during a significant business disruption.    

If registered representatives are unavailable to service their customers, member firms are encouraged to promptly place a notice on their websites indicating to affected customers who they may contact concerning the execution of trades, their accounts, and access to funds or securities. Supervisory control policies and procedures should be considered that will mitigate risks that may arise due to the reduced ability to communicate with customers, inability to rely on the mail or other disruption to the existing controls over communications with customers. 

Under this regulatory guidance, brokerage firms are required to tell their customers who they may contact if they want to execute trades (such as buy or sell orders) or to discuss their accounts or access funds or their investments. Additionally, brokerage firm management is required to take steps to ensure that risks are reduced with respect to any inability to communicate. 

These rules were developed after a series of disasters and emergencies to make sure that you as a customer are able to access your broker, your securities account and your funds.

A History of Disasters Led to the Development of Special Emergency Rules 

In the aftermath of 9/11, FINRA implemented rules requiring member firms to have a business continuity plan (“BCP”). This Rule requires members to establish emergency preparedness plans and procedures including a BCP. Importantly, each broker-dealer member must disclose to its customers how its BCP addresses the possibility of a future significant business disruption.

This rule was in place during Hurricanes Rita and Katrina and the BCP guidelines were tested based upon real-life experiences. FINRA published notices to members with these findings so that each firm could learn what worked best in a disaster. 

Interestingly, in 2009, following the H1N1 swine flu pandemic, FINRA conducted a survey to determine pandemic preparedness. The survey indicated which pandemic plans were triggered by various agencies including the World Health Organization (WHO) Phase declarations and Center for Disease Control (CDC) guidance. That survey identified the most significant challenges likely during a serious pandemic outbreak were absenteeism (25%), telecommunications disruptions (12%) and remote work arrangements (12%). Additional concerns included commuting (9%), provision of customer service (8%), transportation (6%), trade clearance and settlement (5%), counterparties (4%), market volatility (4%), regulatory filings (4%), power disruptions (2%) and access to online accounts (1%). 

Firms were encouraged to make BCP plans to address these challenges. The Coronavirus pandemic has created communications challenges.

THE COMMUNICATION WITH CUSTOMERS RULES DURING THE CORONAVIRUS PANDEMIC

Now that the COVID-19 pandemic has caused securities firms to deal with the situation of is employees and brokers being subject to shelter in place or other rule requiring employees of broker-dealers to be out of their office, new guidance has been given. FINRA has issued these guidelines for its member brokerage firms with respect to communicating with their customers during the COVID-19 pandemic: 

If you are unable to reach your broker on the phone during the coronavirus market crash check the website of the brokerage firm which should have information on who to contact concerning your securities accounts. If you believe you have been harmed because of stockbroker misconduct or fraud during the coronavirus pandemic, or have questions regarding a claim, contact our offices today for a free consultation. Former Wall Street securities attorney Melanie S. Cherdack and her team of lawyers will evaluate your claim at no cost to you. Contact us by filling out our online contact form, or calling 305-349-2336.