Introducing Brokermeans any financial institution or advisor or legal or natural person obtaining remuneration from the Company and/or Clients for introducing Clients/interested parties to the Company. Monthly account statements showing the market value of each penny stock held in the customer’s account. Effecting transactions in securities sold to “qualified institutional buyers.”

Claims under federal and common law typically allege that the clearing broker knew or should have known of the misconduct of the introducing firm and substantially participated or materially assisted in the misconduct. Such claims are usually difficult to prove as courts have held that a clearing broker, performing only routine “back-office” functions, does not substantially participate or materially aid in the misconduct of its introducing firm. These courts have also held that a clearing broker generally owes no fiduciary duty to an introduced customer and, accordingly, is not required to monitor the conduct of the introducing firm for the customer’s benefit.

IB Member Notices

The IB is usually affiliated with the FCM, either as an independent entity that is partnered with that merchant firm or as a direct subsidiary of that FCM. The broker-dealer’s exemption report should fully reflect the nature of all of its business activities. It is common for both of the exemption provisions in paragraph of Rule 15c3-3 to apply to the business activities of an introducing broker dealer.

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If, however, these entities are banks or meet the requirements of the intrastate exemption discussed in Part II.D.2. Above, they must register as municipal securities dealers. Municipal securities brokers must register as general-purpose broker-dealers unless they qualify for the intrastate exception. Most IBs do not have the financial resources to execute trades for their clients directly because that requires a direct relationship with futures exchanges and the large overhead of maintaining accounts, trades, and reporting, as well as developing and maintaining trading platforms. Based on this guidance, a broker-dealer that effects a portion of its business through a clearing broker-dealer and has any other business lines should claim exemptions under both and .

Persons or if they conduct their activities through non-U.S. A broker-dealer also has an obligation to determine customer-specific suitability. In particular, a broker-dealer must make recommendations based on a customer’s financial situation, needs, and other security holdings. This requirement has been construed to impose a duty of inquiry on broker-dealers to obtain relevant information from customers relating to their financial situations and to keep such information current. SROs consider recommendations to be unsuitable when they are inconsistent with the customer’s investment objectives. Firms that limit their securities business to buying and selling municipal securities for their own account must register as general-purpose broker-dealers.

The Top 5 FINRA Exam Myths

The term also shall include transactions in Reportable Securities that are for less than one round lot. The term “Correspondent Executing Broker-Dealer” or “Correspondent Executing Broker” shall mean the member firm that has been identified in the System as having a correspondent relationship with a clearing firm whereby it executes trades and the clearing function is the responsibility of the clearing firm. Introducing brokers help increase efficiency and lower the work load for futures commission merchants.

IBKR Lite provides commission-free trades in US exchange-listed stocks and ETFs. Understand risk vs. returns with real-time market risk management and monitoring that provides a comprehensive measure of risk exposure across multiple asset classes around the world. Pre-trade compliance, real-time market-risk management and monitoring provide a comprehensive measure of risk exposure. 12 When a broker-dealer is a member of more than one SRO, the SEC designates the SRO responsible for examining such broker-dealer for compliance with financial responsibility rules (the “designated examining authority”).

If the is not accepted for clearing by a derivatives clearing organization, the insured depository institution reports the swap as required by section 4r of the Act, 7 U.S.C. 6r (except as otherwise provided in section 4r, 7 U.S.C. 6r, or section 4r, 7 U.S.C. 6r of the Act). The person must keep such representation in accordance with § 1.31. The form, label, and written documentation of an agreement, contract, or transaction shall not be dispositive in determining whether the agreement, contract, or transaction has been willfully structured to evade as provided in paragraphs through of this definition. For purposes of section 1a of the Commodity Exchange Act and this definition, the term foreign exchange swap has the meaning set forth in section 1a of the Commodity Exchange Act. A foreign exchange forward or a foreign exchange swap shall not be considered a swap if the Secretary of the Treasury makes a determination described in section 1a of the Commodity Exchange Act. A swap shall be considered to be subject to daily mark-to-market margining if, and for so long as, the counterparties follow the daily practice of exchanging collateral to reflect changes in the current exposure arising from the swap .

However, reputable registered brokers are choosy about who they accept as introducing brokers. If you want to build a business relationship with brokers – and traders – you will need some kind of professional credentials or an established reputation to be an IB. Broker-dealers must notify customers purchasing securities on credit about the credit terms and the status of their accounts.


You may wish to consult with a private lawyer who is familiar with the federal securities laws, to assure that you comply with all laws and regulations. The SEC staff cannot act as an individual’s or broker-dealer’s lawyer. While the staff attempts to provide guidance by telephone to individuals who are making inquiries, the guidance is informal and not binding.

When executing trades for its own account, the institution is said to be acting as a dealer. Securities bought from clients or other firms in the capacity of dealer may be sold to clients or other firms acting again in the capacity of dealer, or they may become a part of the firm’s holdings. Clearing brokers typically have no personal relationship with their introduced customers. Thus, they have no “know-your-customer” obligation vis-a-vis them and play no role in assessing their investment profiles or making investment recommendation to them. All these functions are entirely the responsibility of the introducing firm.


However, if a person makes an application to limit its designation as a swap dealer to specified categories of swaps or specified activities of the person in connection with swaps, the Commission shall determine whether the person’s designation as a swap dealer shall be so limited. If the Commission grants such limited designation, such limited designation swap dealer shall be deemed to be a swap dealer with respect to each swap it enters into in the swap category or categories for which it is so designated, regardless of the person’s activities in connection with such category or categories of swaps. A person may make such application to limit the categories of swaps or activities of the person that are subject to its swap dealer designation at the same time as, or after, the person’s initial registration as a swap dealer. Notwithstanding the foregoing, no agreement, contract, or transaction structured as a security (including a security-based swap) under the securities laws (as defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c)) shall be deemed a swap pursuant to this paragraph or shall be considered for purposes of paragraph of this definition. An interest rate swap or currency swap, including but not limited to a transaction identified in paragraph of this definition, that is willfully structured as a foreign exchange forward or foreign exchange swap to evade any provision of Subtitle A shall be deemed a swap for purposes of Subtitle A and the rules, regulations, and orders of the Commission promulgated thereunder. This term means a person, other than an eligible contract participant as defined in section 1a of the Act, acting on its own behalf and trading in any account, agreement, contract or transaction described in section 2 or 2 of the Act.

Investors’ Marketplace

Funds from more than 550 fund families and filter funds by country, fund family, transaction fee or fund type. No markups are applied if the client calls IBKR to close a trade. Quickly and easily consolidate financial information from any financial institution with PortfolioAnalyst, a fully featured portfolio management tool. Support for global regulatory reporting including FATCA, MiFID II, AML, GDPR and others. Free client relationship management tools to help you efficiently manage clients. Without prejudice to the Company’s right to claim the full amount owed by the Introducing Broker to the Company under this agreement, if any, the Company has the right to set-off such amount against the Remuneration.

uncollateralized outward exposure

This term means an account that is maintained in accordance with the requirements of section 15 of the Securities Exchange Act of 1934 and Rule 15c3–3 thereunder. This term means the Secretary of Agriculture or any person to whom authority has heretofore lawfully been delegated or to whom authority may hereafter lawfully be delegated to act in his stead. The index has been a narrow-based security index for no more than 45 business days over three consecutive calendar months. The effective notional amounts allocated to reference entities included in the index that satisfy paragraph of this definition comprise at least 80 percent of the index’s weighting.

I. Privacy of Consumer Financial Information (Regulation S-P)

Duty to update define introducing broker BD. A registered broker-dealer must keep its Form BD current. Thus, it must promptly update its Form BD by filing amendments whenever the information on file becomes inaccurate or incomplete for any reason. In contrast, a clearing broker or executing broker executes the trade themselves. Introducing Brokers is a company or an individual that refers clients to the trading floor. Many IBs are one-person operations, while others are larger, multi-location businesses. IBs are better able to service their clients as they are local, and their primary goal is customer service.

The forms of compensation may be sales loads from investors, or Rule 12b-1 fees or servicing fees paid by the mutual funds. There are several online portals that offer broker dealer assistance and search capabilities. In determining whether a person is a swap dealer, that person’s swaps with majority-owned affiliates shall not be considered. $2 billion in aggregate uncollateralized outward exposure plus aggregate potential outward exposure with regard to all of the person’s swap positions. This term means all money, securities and property received, directly or indirectly by a leverage transaction merchant from, for, or on behalf of leverage customers to margin, guarantee or secure leverage contracts and all money, securities and property accruing to such customers as the result of such contracts, or the customers’ leverage equity. In the case of a long leverage transaction, profit or loss accruing to a leverage customer is the difference between the leverage transaction merchant’s current bid price for the leverage contract and the ask price of the leverage contract when entered into.

Applying “Introducing Broker” to Securities Exams:

This means that a broker-dealer must mark orders as “long” or “short.” The duty of best execution, which also stems from the Act’s antifraud provisions, requires a broker-dealer to seek to obtain the most favorable terms available under the circumstances for its customer orders. This applies whether the broker-dealer is acting as agent or as principal. Form BDW is not considered “filed” unless it is deemed complete by the SEC and the SRO that reviews the filing. The SEC may also cancel a broker-dealer’s registration if it finds that the firm is no longer in existence or has ceased doing business as a broker-dealer.

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Please do not provide confidential information or personal data. Incorporating material potential liquidity sources into their order handling practices, and ensuring that the firm can efficiently access each such material potential liquidity source. Accounts are accepted from citizens or residents of all countries except citizens or residents of those countries or regions that are on the sanction list of the US Office of Foreign Asset Controls or similar lists, or other countries determined to be higher risk.

Introduced customers are required to be informed of the clearing agreement and the allocation of functions and responsibilities between the clearing and introducing broker under the agreement. The form of agreement is required to be reviewed and approved by the Financial Industry Regulatory Authority, an industry self-regulatory organization, whose rules are subject to SEC approval. Section 15 of the Act generally makes it unlawful for any broker or dealer to use the mails to “effect any transactions in, or to induce or attempt to induce the purchase or sale of, any security” unless that broker or dealer is registered with the Commission in accordance with Section 15 of the Act.


Like an affiliate marketer, an introducing broker partners with an actual brokerage, but its role is distinct from an affiliate. They offer more services and can also make higher commissions. 9 Exemptions from the requirements of Exchange Act Rules 15g-2 through 15g-6 are provided for non-recommended transactions, broker-dealers doing a minimal business in penny stocks, trades with institutional investors, and private placements.

The broker-dealer must also prepare a written report detailing the results of the review and assessment, including a description of all deficiencies found and any plan to address deficiencies, and present the report to the firm’s board of directors . There is no single best commission plan for Introducing Brokers. Your choice of plan will depend entirely on the number and quality of your referrals . Ideally you should find a leading broker with a reliable affiliate program and check them out. They should give you the option to negotiate a personalised commission plan for introducing brokers. This could be CPA, RevShare, Hybrid or a specialist plan.

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