I. Emergency Contact Persons
Our firm’s two emergency contact persons are: Stephen A. Kohn, 303-996-5680, firstname.lastname@example.org and Nicole S. Slack, 303-996-5671, email@example.com. These names will be updated in the event of a material change.
Rule: FINRA Rule 3520.
II. Firm Policy
Our firm’s policy is to respond to a Significant Business Disruption (SBD) by safeguarding employees’ lives and firm property, making a financial and operational assessment, quickly recovering and resuming operations, protecting all of the firm’s books and records, and allowing our customers to transact business. In the event that we determine we are unable to continue our business, we will assure customers prompt access to their funds and securities.
A. Significant Business Disruptions (SBDs)
Our plan anticipates two kinds of SBDs, internal and external. Internal SBDs affect only our firm’s ability to communicate and do business, such as a fire in our building. External SBDs prevent the operation of the securities markets or a number of firms, such as a terrorist attack, a city flood, or a wide-scale, regional disruption. Our response to an external SBD relies more heavily on other organizations and systems, especially on the capabilities of our clearing firm.
B. Approval and Execution Authority
Stephen A. Kohn, President, a registered principal, is responsible for approving the plan and for conducting the required annual review. Stephen A. Kohn has the authority to execute this BCP.
C. Plan Location and Access
Our firm will maintain copies of its BCP plan and the annual reviews, and the changes that have been made to it for inspection. An electronic copy of our plan is located at www.sakohn.com as well as on Mr. Kohn’s personal computer transported off-site, daily.
III. Business Description
Our firm conducts business in equity, fixed income, and derivative securities. Our firm is an introducing firm and does not perform any type of clearing function for itself or others. Furthermore, we do not hold customer funds or securities. We accept and enter orders. All transactions are sent to our clearing firm, which [executes our orders,] compares them, allocates them, clears and settles them. Our clearing firm also maintains our customers’ accounts, can grant customers access to them, and delivers funds and securities. Our firm services only retail customers.
Our clearing firm is National Financial Services, LLC, 200 Seaport Boulevard, Boston, MA 02210, 800-752-7053, www.nationalfinancial.com, and our contact person at our clearing firm is Thomas Griffin, (617) 392-2957, firstname.lastname@example.org. Our clearing firm has also given us the following alternative contact in the event Mr. Griffin cannot be reached: Laura Lynn Morrissey, (617) 392-0327, email@example.com.
IV. Office Locations
A. Office Location
Our corporate office is located at 7114 W. Jefferson Avenue, Suite 305 * Lakewood, CO 80235. Its main telephone number is (303) 984-2558. Our employees may travel to that office by means of foot, car, bus or bicycle. We engage in order taking and entry at this location.
V. Alternative Physical Location(s) of Employees
In the event of an SBD, we will move our staff from affected offices to 10572 West Indore Drive, Littleton, Colorado. Its main telephone number is (303) 880-4304. Our employees may travel to that office by means of foot, car, bus or bicycle. In the event of a Significant Business Disruption we will engage in order taking and entry at this location.
Rule: FINRA Rule 3510(c)(6).
VI. Customers’ Access to Funds and Securities
Our firm does not maintain custody of customers’ funds or securities, which are maintained at our clearing firm, National Financial Services, LLC. In the event of an internal or external SBD, if telephone service is available, our registered persons will take customer orders or instructions and contact our clearing firm on their behalf, and if our Web access is available, our firm will post on our Web site that customers may access their funds and securities by contacting Stephen A. Kohn, (888) 984-2558, firstname.lastname@example.org. The firm will make this information available to customers through its Website.
If SIPC determines that we are unable to meet our obligations to our customers or if our liabilities exceed our assets in violation of Securities Exchange Act Rule 15c3-1, SIPC may seek to appoint a trustee to disburse our assets to customers. We will assist SIPC and the trustee by providing our books and records identifying customer accounts subject to SIPC regulation.
Rules: FINRA Rule 3510(a); Securities Exchange Act Rule 15c3-1; 15 U.S.C. 78eee (2003).
VII. Data Back-Up and Recovery (Hard Copy and Electronic)
Our firm maintains its primary hard copy books and records and its electronic records at 7114 W. Jefferson Avenue, Suite 305 * Lakewood, CO 80235. Stephen A. Kohn, President, (303) 984-2558, is responsible for the maintenance of these books and records. Our firm maintains the following document types and forms that are not transmitted to our clearing firm: new account applications for non-qualified accounts, one-time IRA withdrawal forms, portion of customer margin agreements, management agreements and ACAT forms.
Our firm maintains its back-up hard copy books and records at 10572 West Indore Drive, Littleton, Colorado 80127. These records are computer record backup, non-erasable compact disks. Stephen A. Kohn, 303-984-2558 is responsible for the maintenance of these back-up books and records. Our firm backs up its paper records by scanning them, copying the scanned documents to compact disks and taking them to our back-up site. We back up our records weekly to non-erasable compact disks.
The firm backs up its electronic records weekly with standard computer backup procedures and keeps a copy at 10572 West Indore Drive, Littleton, Colorado 80127.
In the event of an internal or external SBD that causes the loss of our paper records, we will physically recover them from our scanned document files as necessary. If our primary site is inoperable, we will continue operations from our back-up site or an alternate location. For the loss of electronic records, we will either physically recover the storage media or electronically recover data from our back-up site, or, if our primary site is inoperable, continue operations from our back-up site or an alternate location.
Rule: FINRA Rule 3510(c)(1).
VIII. Financial and Operational Assessments
A. Operational Risk
In the event of an SBD, we will immediately identify what means will permit us to communicate with our customers, employees, critical business constituents, critical banks, critical counter-parties, and regulators. Although the effects of an SBD will determine the means of alternative communication, the communications options we will employ will include our Website, www.sakohn.com, telephone and voice mail (303) 984-2558 and email, email@example.com. In addition, we will retrieve our key activity records as described in the section above, Data Back-Up and Recovery (Hard Copy and Electronic).
Rules: FINRA Rules 3510(c)(3) & (f)(2).
B. Financial and Credit Risk
In the event of an SBD, we will determine the value and liquidity of our investments and other assets to evaluate our ability to continue to fund our operations and remain in capital compliance. We will contact our clearing firm, critical banks and/or investors to apprise them of our financial status. If we determine that we may be unable to meet our obligations to those counter-parties or otherwise continue to fund our operations, we will request additional financing from our bank or other credit sources to fulfill our obligations to our customers and clients. If we cannot remedy a capital deficiency, we will file appropriate notices with our regulators and immediately take appropriate steps, including ceasing operation as a Broker/Dealer, turning all control of customer accounts to our clearing agent for service.
Rules: FINRA Rules 3510(c)(3), (c)(8) & (f)(2).
IX. Mission Critical Systems
Our firm’s “mission critical systems” are those that ensure prompt and accurate processing of securities transactions, including order taking, entry, execution, comparison, allocation, clearance and settlement of securities transactions, the maintenance of customer accounts, access to customer accounts, and the delivery of funds and securities.
We have primary responsibility for establishing and maintaining our business relationships with our customers and have sole responsibility for our mission critical functions of order taking and entry. Our clearing firm provides, through contract, the execution, comparison, allocation, clearance and settlement of securities transactions, the maintenance of customer accounts, access to customer accounts, and the delivery of funds and securities.
Our clearing firm contract provides that our clearing firm will maintain a business continuity plan and the capacity to execute that plan. Our clearing firm represents that it will advise us of any material changes to its plan that might affect our ability to maintain our business and have made a copy of that plan available to us. In the event our clearing firm executes its plan, it represents that it will notify us of such execution and provide us with equal access to services as its other customers. If we reasonably determine that our clearing firm has not or cannot put its plan in place quickly enough to meet our needs, or is otherwise unable to provide access to such services, our clearing firm represents that it will assist us in seeking services from an alternative source.
Our clearing firm represents that it backs up our records at a remote, out of region site. Our clearing firm represents that it operates a back-up operating facility in a geographically separate area with the capability to conduct the same volume of business as its primary site. Our clearing firm has also confirmed the effectiveness of its back-up arrangements to recover from a wide scale disruption by testing and it has confirmed that it tests its back-up arrangements at least twice a year.
Recovery-time objectives provide concrete goals to plan for and test against. They are not, however, hard and fast deadlines that must be met in every emergency situation, and various external factors surrounding a disruption, such as time of day, scope of disruption, and status of critical infrastructure—particularly telecommunications—can affect actual recovery times. Recovery refers to the restoration of clearing and settlement activities after a wide-scale disruption; resumption refers to the capacity to accept and process new transactions and payments after a wide-scale disruption. Our clearing firm has the following SBD recovery time and resumption objectives: recovery time period of less than one hour and resumption time of less than one day.
A. Our Firm’s Mission Critical Systems
1. Order Taking
Currently, our firm receives customer orders from our Representatives via telephone and/or email. During an SBD, either internal or external, we will continue to take orders through any of these methods that are available and reliable, and in addition, as communications permit, we will inform our customers when communications become available to tell them what alternatives they have to send their orders to us. Customers will be informed of alternatives by email. If necessary, we will advise our customers to place orders directly with our clearing firm at 617-563-5977.
2. Order Entry
Currently, our firm enters orders by recording them on paper, time stamping the paper trade tickets and forwarding the trade to our clearing firm electronically. We place customer orders electronically through StreetScape, as a rule. We have reviewed the National Financial Services, LLC Business Continuity Plan. Under its BCP, we can expect key functions to be operational within one hour in an SBD.
In the event of an internal SBD, we will enter and send records to our clearing firm by the fastest alternative means available, which include telephone, FAX and email. In the event of an external SBD, we will maintain the order in electronic or paper format, and deliver the order to the clearing firm by the fastest means available when it resumes operations. In addition, during an internal SBD, we may need to refer our customers to deal directly with our clearing firm for order entry.
3. Order Execution
We currently enter orders for execution by forwarding them to our clearing agent either telephonically, by FAX, email or by entering them in the StreetScape system. In the event of an internal SBD, we would forward orders to our clearing agent by the fastest means possible once communication was re-established. In the event of an external SBD, we would forward orders to our clearing agent by the fastest means possible once communication was re-established.
B. Mission Critical Systems Provided by Our Clearing Firm
Our firm relies, by contract, on our clearing firm to provide order execution, order comparison, order allocation, and the maintenance of customer accounts, delivery of funds and securities, and access to customer accounts.
Rules: FINRA Rules 3510(c) & (f)(1).
X. Alternate Communications Between the Firm and Customers, Employees, and Regulators
We now communicate with our customers using the telephone, e-mail, our Web site, fax, U.S. mail, and in person visits at our firm or at the other’s location. In the event of an SBD, we will assess which means of communication are still available to us, and use the means closest in speed and form, written or oral, to the means that we have used in the past to communicate with the other party. For example, if we have communicated with a party by e-mail but the Internet is unavailable, we will call them on the telephone and follow up where a record is needed with paper copy in the U.S. mail.
Rule: FINRA Rule 3510(c)(4).
We now communicate with our employees using the telephone, e-mail, U.S. Priority Mail and in person. In the event of an SBD, we will assess which means of communication are still available to us, and use the means closest in speed and form, written or oral, to the means that we have used in the past to communicate with the other party. We will also employ a call tree so that senior management can reach all employees quickly during an SBD. The call tree includes all staff home and office phone numbers. We have identified persons, noted below, who live near each other and may reach each other in person:
The person to invoke use of the call tree is: Stephen A. Kohn.
Rule: FINRA Rule 3510(c)(5).
We are currently a member of the following SROs: FINRA and MSRB. We communicate with our regulators using the telephone, e-mail, fax, U.S. mail, and in person. In the event of an SBD, we will assess which means of communication are still available to us, and use the means closest in speed and form, written or oral, to the means that we have used in the past to communicate with the other party.
Rule: FINRA Rule 3510(c)(9).
XI. Critical Business Constituents, Banks, and Counter-Parties
A. Business constituents
We have contacted our critical business constituents, businesses with which we have an ongoing commercial relationship in support of our operating activities, such as vendors providing us critical services, and determined the extent to which we can continue our business relationship with them in light of the internal or external SBD. We will quickly establish alternative arrangements if a business constituent can no longer provide the needed goods or services when we need them because of a SBD to them or our firm.
Rules: FINRA Rule 3510(c)(7).
We have contacted our banks and lenders to determine if they can provide the financing that we will need in light of an internal or external SBD. The bank maintaining our operating account is: Bank of Colorado, 300 Union Boulevard, Suite 200, Lakewood, CO 80228, Randall L. Hoffman, Branch President. If our banks and other lenders are unable to provide the financing, we will seek alternative financing immediately from private sources.
Rules: FINRA Rule 3510(c)(7).
We are establishing critical counter-parties, such as other broker-dealers, to determine if we will be able to carry out our transactions with them in light of the internal or external SBD. Where the transactions cannot be completed, we will work with our clearing firm or contact those counter-parties directly to make alternative arrangements to complete those transactions as soon as possible.
Rules: FINRA Rules 3510(a) &(c)(7).
XII. Regulatory Reporting
Our firm is subject to regulation by: FINRA, MSRB, various states and the SEC. We now file reports with our regulators using paper copies in the U.S. mail, and electronically using fax, e-mail, and the Internet. In the event of an SBD, we will check with the SEC, FINRA, MSRB and other regulators to determine which means of filing are still available to us, and use the means closest in speed and form, written or oral, to our previous filing method. In the event that we cannot contact our regulators, we will continue to file required reports using the communication means available to us. Regulator contact information is as follows: FINRA (303) 446-3100, MSRB (703) 797-6600 and the SEC (202) 942-8088.
Rule: FINRA Rule 3510(c)(8).
XIII. Disclosure of Business Continuity Plan.
We provide in writing a BCP disclosure statement to customers at account opening and annually as an account statement insert. We also post the disclosure statement on our Web site and mail it to customers upon request. Our disclosure statement is attached. Customers are informed to review Firm's Website for BCP disclosure statement.
Rule: FINRA Rule 3510(e).
XIV. Updates and Annual Review
Our firm will update this plan whenever we have a material change to our operations, structure, business or location or to those of our clearing firm. In addition, our firm will review the BCP to certify and test pursuant to FINRA Rules.
Rule: FINRA Rule 3510(b).
XV. Senior Manager Approval
I have approved this Business Continuity Plan as reasonably designed to enable our firm to meet its obligations to customers in the event of an SBD.
Rule: FINRA Rule 3510(d).
Business Continuity Plan
National Financial Services, Inc.
January 1, 2018
NF Clearing, Inc. (NFC) is a broker-dealer and member of the NYSE and FINRA and acts as the clearing firm for Stephen A. Kohn & Associates, Ltd. (SAKL), your Broker/Dealer. Your assets are held at NFC.
NYSE Rule 446 and FINRA Rule 3510 require each member firm to create and maintain a business continuity plan. In accordance with these rules NFC has developed a plan to ensure that business continues to run uninterrupted during business emergencies. SAKL, based on its relationship with NFC relies on the NFC Business Continuity Plan to ensure that your account is safely maintained in the event of most any form of business disruption.
The plan is designed to address key areas of concern including but not limited to the following:
Events creating a disruption of business may vary in nature. They could affect only NFC, affect the building where NFC is located, affect the entire business district where NFC is located, result in a citywide disruption or result in a regional disruption. NFC fully intends to continue to conduct a securities business during these periods of business disruption ranging from disruptions that only affect NFC to disruptions that have regional impact.
To address disruptions affecting only NFC, the building where NFC is located or the business district where NFC conducts business, NFC has arranged with an outside organization to supply a physical location as well as key technology infrastructure in an area that does not share any power grids with the current location and will afford NFC the opportunity to relocate its key employees and critical information technology systems in order to provide services for its clients.
To address citywide and regional business disruptions, NFC has contracted with a vendor to supply NFC alternate office space and key information technologies in cities and regions that differ from NFC’s locations. NFC intends to take advantage of this and also use the facilities of affiliates that may be located in other cities or regions of the country.
Please be advised that business continuity plans are subject to change and modification. NFC intends to update and test its business continuity plans as business conditions and technology change.
Should you have any questions concerning the business continuity plan please submit a written request for additional information to your broker.