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NFA to Require Asset Manager Members to Adopt Written Supervisory Framework for Third-Party Service Providers – Action Required

On March 24, 2021, the National Futures Association (“NFA”) issued a notice to members announcing the effective date of recently adopted Interpretive Notice 9079 - NFA Compliance Rules 2-9 and 2-36: Members’ Use of Third-Party Service Providers (the “Notice”). Effective September 30, 2021, NFA members, including registered commodity pool operators and commodity trading advisors (collectively, “firms”) who outsource to a third-party service provider or vendor (a “third-party service provider”) functions necessary for compliance with NFA and/or Commodity Futures Trading Commission (“CFTC”) requirements (“regulatory functions”) must adopt and implement a written supervisory framework for their outsourcing activity to mitigate associated risks. Firms are reminded that even if they outsource regulatory functions, they remain responsible for complying with all NFA and/or CFTC requirements, and are therefore subject to discipline if the third-party service provider fails to perform.

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NFA Amends Branch Office Definition to Accommodate Remote Work by APs

Time to Read: 1 minutes Practices: Derivatives & Commodities, Asset Management

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The National Futures Association (“NFA”) recently amended Interpretive Notice 9002 – Registration Requirements; Branch Offices (the “Interpretive Notice”) to allow certain NFA members, including registered commodity pool operators and commodity trading advisors, (collectively, “firms”) to implement remote and hybrid work arrangements for their associated persons (“APs”) without listing APs’ remote work locations, whether homes or shared co-working spaces, as branch offices. The revised Interpretive Notice will be effective as of September 23, 2021.

Currently, a “branch office” is defined to mean any location, other than the firm’s main business address, from which an AP engages in activities requiring registration. As amended, the Interpretive Notice excludes from the definition of branch office any location that one or more APs from the same household lives in, rents or leases, provided that (i) such locations are not held out to the public as offices of the firm, (ii) APs do not have in-person meetings with customers or physically handle customer funds at such locations, and (iii) any records created at such locations that are subject to Commodity Futures Trading Commission (“CFTC”) or NFA recordkeeping requirements can be accessed for inspection at the firm’s main office or applicable listed branch office.

Once the amendment is effective, firms should consider whether they will be able to delist any locations currently identified as branch offices that are no longer branch offices under the amended definition.

Please contact Leigh R. Fraser, Jeremy A. Liabo, Katherine J. Forrester-Quek or the Ropes & Gray attorney who usually advises you for further information or with any questions you may have.


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