LAFAYETTE INVESTMENTS, INC.
BUSINESS CONTINUITY DISCLOSURE SUMMARY
FINRA Rule 4370 requires Lafayette Investments, Inc. (“Lafayette” or “the Firm”) and introducing firms like it to create and maintain Business Continuity Plans (BCPs) and emergency contact information that are designed to enable the Firm to continue to meet its obligations to customers in the event of a significant business disruption. Lafayette provides this BCP Summary to customers upon account opening, and provides notice to all customers that it is available upon request by means of an annual statement notice. Lafayette’s website provides a link to the Firm’s Summary BCP. Lafayette will also provide a written summary of the BCP of its clearing firm, First Clearing, upon request.
Lafayette’s BCP sets forth procedures that the Firm will follow in case of a significant business disruption. Lafayette will review and update the BCP as required by FINRA Rules, and as dictated by important changes to the Firm’s operations. Lafayette will at a minimum conduct an annual review of its BCP and revise it as required by changes to the Firm’s business operations. Lafayette’s BCP includes by reference the Firm’s comprehensive Pandemic Preparedness Planning document updated in February 2020.
The following are the key elements of Lafayette’s BCP:
Data back-up and recovery;
All mission critical systems;
Financial and operational assessments;
Alternate communications between customers and Lafayette;
Alternate communications between Lafayette and its employees;
Alternate physical location of employees;
Critical business constituent, bank and counter-party impact;
Communications with regulators; and
How Lafayette will assure customers’ prompt access to their funds and securities in the event that Lafayette determines that it is unable to continue its business.
Lafayette has considered and made plans for disruptions that affect either of its two office locations, the particular cities in which these offices are located and disruptions that affect widespread areas of the region and of the continental United States, including the operations of its clearing firm, First Clearing, with main offices located in St. Louis, Missouri and Richmond, Virginia.
In case of a disruption to the particular building or particular city location of either of Lafayette’s offices, employees of one office could be relocated to the other office in order to continue to provide full service to customers and communication with regulators. Key employees from each office have secure remote access to every capability currently available on their office computers.
Lafayette’s two offices are located about 15 miles apart in suburban Maryland. As long as one location or the other maintains contact with First Clearing and has access to computer facilities, there should be no significant business disruption as a result of a temporary inability to use either office facility. In case both of Lafayette’s locations become uninhabitable in an emergency, employees with remote access can step in to provide essential services from the remote location of their choice.
Lafayette relies upon its clearing firm, First Clearing, to provide mission critical systems that enable the Firm to process securities transactions promptly and accurately and to permit it to maintain customer accounts and give customers access to their funds and securities. First Clearing’s own BCP states that First Clearing has established alternate site facilities. Alternate trading locations have un-interruptible power sources, 24-hour security service and fully functional trading areas available around the clock. First Clearing has provided Lafayette with alternate contact methods to be used in case of a business disruption, and key Lafayette employees have access to these methods both at work and at home. Lafayette has established and tested a contact list with employees’ home and cell phone numbers and personal email accounts for use during a business disruption. Depending upon the type of business disruption that occurs, Lafayette can remain in contact with its employees and communicate alternate operational arrangements.
First Clearing’s BCP has established disaster recovery plans for a widespread disruption that rely on the use of alternate sites and data centers located outside of the St. Louis, MO and Richmond, VA areas. First Clearing expects to restore time-sensitive functions at alternate facilities as soon as employees can be relocated there. First Clearing may have access to some facilities of Wells Fargo for use in case of citywide or regional business disruptions. In addition, First Clearing has developed alternate service arrangements and contingency plans with its internal and external service providers sufficient to provide it, and Lafayette, with the necessary applications to continue or promptly resume business. Please note that the nature of a particular business disruption may require deviations from the plan without prior notice.
It is Lafayette’s intention to continue essential operations and resume normal operations as soon as possible in any of the scenarios outlined above. In keeping with regulatory requirements, the names and contact information of two Lafayette senior management contacts are on file with FINRA, and are updated promptly when any material contact information changes occur. Lafayette’s emergency contact information on file is verified periodically as required by FINRA Rule 4517.
SIPC PROTECTION DISCLOSURE
Securities and cash in client accounts have two sources of protection in the event of First Clearing’s insolvency. Both Lafayette and First Clearing are members of Securities Investor Protection Corporation (SIPC). SIPC protects the clients of its member firms against the loss of their cash and securities in the event of the member’s insolvency and liquidation.
SIPC coverage is limited to $500,000 per customer (including $250,000 for claims for cash). For more information on SIPC coverage, please see the explanatory brochure at www.sipc.org or contact SIPC at (202) 371-8300.
In addition, First Clearing maintains additional insurance coverage provided through London Underwriters, led by Lloyds of London Syndicates (“Lloyd’s”). For clients who have received the full SIPC payout limit, First Clearing’s policy with Lloyd’s provides additional coverage above the SIPC limits for any missing securities and cash in client brokerage accounts up to a clearing-firm aggregate limit of $1 billion (including up to $1.9 million for cash per client). SIPC does not insure the quality of investments or protect against market losses. SIPC only protects the custody function of its members, which means that SIPC works to restore to clients their securities and cash that are in their accounts when the member firm liquidation begins. Not all investments are protected by SIPC. In general, SIPC does not cover investments such as unregistered investment contracts, unregistered limited partnerships, fixed annuity contracts, escrow receipts, direct investments, currency, commodities or related contracts, hedge funds and certain other investments.
Please refer to the Account Protection section of your statement for SIPC coverage limitations in accounts carried by First Clearing. Monies held in the Standard Bank Deposit Sweep and Expanded Bank Deposit Sweep are not covered by SIPC, but are instead eligible for FDIC insurance of up to $250,000 per depositor, per institution, in accordance with FDIC rules. For additional information on the Bank Deposit Sweep Programs for your account, please contact the Lafayette representative listed on your brokerage statement.
March 13, 2020