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NFA adopts new rule and interpretive notice to address disaster recovery and business continuity issues

On July 1, 2003, NFA’s new Compliance Rule 2-38 and its related Interpretive Notice relating to disaster recovery requirements will become effective. The Rule contains the general requirement that Members establish and maintain reasonable business continuity plans. The Interpretive Notice provides guidance on the essential components of an effective business continuity plan and what is required to maintain that plan.

“The world environment that we live and work in now requires all of us to be prepared for events that could seriously disrupt our businesses,” said NFA President Dan Roth. “This rule and interpretive notice are the culmination of an initiative that NFA began more than 18 months ago.”

In light of the events of September 11, 2001, NFA added disaster recovery and business continuity steps to its Self-Examination Checklist to help Members prepare for emergency business interruptions. These steps provide Members with a basic framework to tailor their disaster recovery plans to their own situation and needs.

While the Executive Committee applauded NFA’s efforts as a first step to focus Members’ attention upon disaster recovery and business continuity issues, it encouraged NFA staff to develop a compliance rule addressing these important issues.

Once NFA had drafted the rule and interpretive notice, staff discussed them with the FCM, IB and CPO/CTA Advisory Committees. Although the committees generally supported the proposed rule and interpretive notice, they suggested several revisions to reflect the concerns of their constituents.

Compliance Rule 2-38 requires each NFA Member to establish and maintain a written business continuity and disaster recovery plan that outlines procedures to be followed in the event of an emergency or significant business disruption. Each Member must also provide NFA with the names and contact information for an individual NFA can contact in the event of an emergency, and the Member must update that information upon request.

The Interpretive Notice related to Rule 2-38 provides additional guidance on the essential components of an adequate Disaster Recovery Plan. These components include:

  • Establishing back-up facilities, systems and personnel;
  • Backing up or copying essential documents and data on a periodic basis and storing the information off-site in either hard-copy or electronic formats;
  • Considering the impact of business interruptions encountered by third parties and identifying ways to minimize that impact; and
  • Developing a communication plan to contact essential parties such as employees, customers, carrying brokers, vendors and disaster recovery specialists.

“The development of this rule and interpretive notice exemplifies the critical role NFA Members play in the rule-making process,” said Roth. “Our discussions with our Advisory Committees provided us with several helpful suggestions and a better insight into the practical implications of the rule on our Members.”

NFA Members can download copies of the rule, interpretive notice and NFA’s Self-Examination Checklist from NFA’s Web site at www.nfa.futures.org or obtain a hardcopy by calling NFA at (312) 781-1410.

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