Reminder: NFA Third Party Service Provider Requirements

Jul 17, 2022

Turnkey wanted to do an annual reminder for its customers about NFA’s Third-Party Service Provider (“TPSP”) policies and procedures requirement. The current TPSP obligation includes complex obligations of firms with regard to how they outsource to certain third-party vendors.The newest obligations required by NFA went into effect on September 30, 2021. Beginning on that date, NFA members without policies and procedures in this area are deemed to not be in compliance. This policy is required of all member firms commodity trading advisors (CTA), commodity pool operators (CPO), introducing brokers (IB), and futures commission merchants (FCM).

Being in compliance with these requirements should be a top priority. Therefore, any firms that have not yet considered this mandatory obligation would be advised to do so immediately. In fact, Turnkey has actually seen NFA test in this area during several examinations of our customers. Unlike other regulatory adjustments, this obligation is fairly substantive. To learn more, please review this Turnkey article from April of 2021. The post goes more in depth into the subtleties of NFA’s Interpretive notice 9079.

As an example, the TPSP obligation requires that CFTC registrant, NFA member firms have in place official:

Initial risk assessment;
On-boarding due diligence;
Ongoing monitoring;
Termination; and
Record-keeping.

Over the last year, Turnkey has been working with many of its customers to update their existing policies and procedures manual. While many companies may have had in place a due diligence process for certain technology vendors as part of their information security systems program (“ISSP”) this new TPSP program is quite different and may be much more involved.

To learn more about your TPSP obligations please contact Turnkey today. Turnkey staff can assist your firm in adhering to these new obligations while ensuring appropriate policies and procedures have been established. For more information on our Compliance Consulting solutions, please click here.