New Outsourced Compliance Guidance – Implications For CFTC-Registered Private Fund Managers

Key Point

• As of September 30, 2021, private fund managers registered with the CFTC as CPOs or CTAs will be required, under new NFA guidance, to supervise certain third-parties performing regulatory functions.

Effective September 30, 2021, private fund managers that are registered with the Commodity Futures Trading Commission (either as commodity pool operators or commodity trading advisors) and are National Futures Association members will be required, under a new NFA interpretive notice,¹ to demonstrate that they are effectively supervising third-parties that perform regulatory functions.

While a registered private fund manager is already required, under NFA Compliance Rule 2-9(a), to "diligently supervise its employees and agents in the conduct of their commodity interest activities," the new interpretive notice expressly states that the manager "may be subject to discipline" if a third party's acts or omissions cause compliance failures by the manager.