Regulations - Guaranteed And Independent IBs

Guaranteed And Independent IBs
The Futures Trading Practices Act of 1982 created introducing brokers (IBs) as a new class of CFTC registrant. IBs generally were independent entities that solicited and accepted customer orders, but used the services of FCMs for clearing, recordkeeping and retaining customer funds. In response to industry concern that most brokers required to register as IBs would be unable to meet net capital requirement (described below), the CFTC permits any IB to satisfy its capital requirement by entering into a guarantee agreement with an FCM, through which the "guarantor FCM" undertakes to assure that the IB will perform its obligations.

A newly registered AP, such as someone who has recently passed the Series 3, may very well end up taking orders for an IB as an entry-level job. As such, it is important that those taking the test understand that the IB cannot accept customer funds in its own name. Regulations stipulate that an IB may not accept money, securities or property from customers, except for checks made payable to the FCM. Such payments must either be deposited immediately in a qualifying bank account or mailed immediately to the FCM.

Net Capital Requirements


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