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The NFA has announced that from September 20, 2021, members will be required to enact a formal, supervisory framework to oversee third-party service providers.
The requirements to review the way firms supervise outsourced services are part of the Interpretive Notice 9079 entitled NFA Compliance Rules 2-9 and 2-36: Members’ Use of Third-Party Service Providers. The idea behind the Interpretive Notice is for firms to hedge themselves from the potential compliance risks associated with outsourcing certain operational functions, including administrative services, consulting services, accounting services, and so on.
NFA clearly stated that members who have an existing supervisory framework for outsourced activities are not required to design or implement a new framework. Instead, the current policies and procedures may just be reviewed and modified as necessary to meet the requirements of the Interpretive Notice.
NFA clearly stipulated that firms’ supervisory framework must address:
- Initial risk assessment
- Onboarding due diligence
- Ongoing monitoring
- Termination
- Recordkeeping.
NFA also developed a supplement to the Self-Examination Questionnaire to assist in the understanding and implementation of the requirements.
What does the Interpretive Notice mean for NFA members?
The announcement means that you have until the end of September of this year to perform an evaluation of any outsourced operational functions your firm utilizes. And to ensure you have supervision procedures which will adequately address all required portions of NFA’s Interpretive Notice but which will also be tailored to your firm’s operations.
We can help
We are experts in developing control frameworks and interpreting NFA requirements. Get in touch if you’d like to discuss what this means for you.
