Pardon My Interpretive Notices: The NFA Releases Two Interpretive Notices for Members

Initial Risk Assessment As an initial matter, the Service Provider Notice states that Members should determine whether a particular service provider, and the particular service(s), are appropriate and, at a minimum, should consider: (1) whether there is adequate protection of confidential, personall...

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Bibliographic Details
Published in:The Investment Lawyer 2021-08, Vol.28 (8), p.11-15
Main Authors: Humenik, Stephen M, Rogers, Matthew J, Knight, Jordan A, Perocchi, Eliza T
Format: Article
Language:English
Subjects:
Agreements
Commodities
Compliance
Due diligence
Futures
Orientations
Outsourcing
Risk assessment
Third party
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Summary:Initial Risk Assessment As an initial matter, the Service Provider Notice states that Members should determine whether a particular service provider, and the particular service(s), are appropriate and, at a minimum, should consider: (1) whether there is adequate protection of confidential, personally identifying information; (2) the regulatory impact if the service provider fails to carry out its functions properly; and (3) the service provider's location and whether it has adequate resources to meet its contractual obligations and provide the Member with access to required records. Onboarding Due Diligence The Service Provider Notice also notes that prior to entering into a contractual relationship, Members should ensure the service provider can perform the outsourced function in compliance with applicable regulations. In particular, a Member's ongoing monitoring should include both a continuous review of particular outsourced functions to ensure that they are being performed appropriately, and periodic holistic reviews of the service provider's performance, regulatory compliance and, if appropriate, information technology security, financial stability, business continuity and contingency plans, audit or examination results, websites, public filings, insurance coverage, and references. [...]Members should have a process for escalation to senior management and should consider the procedures associated with any contract renewal.
ISSN:1075-4512