NFA Adopts Supervisory Framework On Outsourcing Arrangements

NFA approved the adoption of a new interpretive notice to Compliance Rules 2-9 ("Supervision") and 2-36 ("Requirements for Forex Transactions") that requires CFTC-registered firms that outsource regulatory obligations to implement a written supervisory framework governing the outsourcing arrangements.

NFA stated that firms should tailor their written supervisory frameworks to their specific business activities, and should address the following areas:

• Initial Risk Assessment. A firm should determine the appropriateness of outsourcing a particular regulatory function, including the third-party provider's security with regard to confidential, personally identifying information, the provider's location and the impact on customers if the third party fails to carry out its responsibilities;