The National Futures Association (NFA), the US derivatives self-regulatory organization, has coordinated with the US Commodity Futures Trading Commission (CFTC) to release three notices to NFA members regarding the coronavirus pandemic and firms’ responses to the crisis. The notices address branch offices, swap dealer (SD) telework and general business continuity plan updates. We summarize the notices below.
Branch Office Relief
Today, March 13, 2020, NFA granted branch office relief for members whose associated persons are teleworking as part of a business continuity plan in response to the crisis. In a notice to members, NFA acknowledged that a number of brokers and trading firms are considering permitting employees to work from home or other remote locations that have not been listed as a branch office in the firm’s Form 7-R. NFA Interpretive Notice 9002 – Registration Requirements; Branch Offices requires NFA members (other than SDs) to treat as a branch office any location from which associated persons (APs) are engaged in activities that require registration, other than the firm’s main business address. Each branch office location is required to have a branch office manager, who is required to be registered and complete the Series 30 Branch Manager Examination.
Due to the unfolding COVID-19 situation, NFA announced that it will not pursue a disciplinary action against a firm that permits APs to temporarily work from locations not listed as a branch office without a branch manager, provided that the firm:
- Implements alternative supervisory methods to adequately supervise the APs’ activities and meet its recordkeeping requirements; and
- Ensures that the procedures are documented.
NFA expects such APs to return to the main office or become listed as a branch office once the firm is no longer operating pursuant to its business continuity plan.
On March 12, 2020, NFA reminded SDs of their reporting obligations arising from CFTC Rule 23.603. SDs must notify CFTC staff if the SD implements a teleworking plan or activates its business continuity plan for any reason other than testing.
Such notices should be sent to email@example.com.
Business Continuity Plans
On March 4, 2020, NFA encouraged member firms to review their business continuity plan to ensure the plan is up to date to address the COVID-19 situation and allow members to operate effectively. NFA also asked firms to provide employees with additional or refresher training on operating from a remote location, identify key third-party relationships (clearing firms, telecommunications networks, mail or email services), assess potential pandemic risks to those relationships and understand how the pandemic may materially impact the business.
Other Mayer Brown Regulatory Updates
For CFTC firms dually registered with the US Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA), Mayer Brown has provided Legal Updates regarding similar regulatory actions by those agencies.