Independent IB Requirements

Required Accounting Records

Independent Introducing Brokers (IB) are required to maintain an accounting system recording all of the firm's financial activity. The Financial Reports created from the accounting system must be prepared following U.S. generally accepted accounting principles (GAAP), must be done on an accrual basis, and must be kept current. Additionally, NFA Financial Requirements Section 5 and CFTC Regulation 1.17 include definitions which a member should fully understand in order to properly prepare its financial reports.

Adjusted Net Capital

Independent IBs are required to maintain at all times Adjusted Net Capital greater than the minimum net capital requirement for that Independent IB. Adjusted Net Capital is computed as follows: 

Current Assets – Liabilities – Charges against Capital = Adjusted Net Capital

When computing Adjusted Net Capital, a firm may exclude a liability that is subordinated to the claims of all general creditors pursuant to a satisfactory subordination agreement. A subordinated loan agreement must be filed with NFA at least ten days prior to the proposed effective date of the agreement and cannot be considered satisfactory until NFA finds the agreement acceptable. Broker dealer IBs file through WinJammerTM and non-broker dealer IBs file through EasyFile. In order to facilitate the approval  for subordinated loan agreements (SLA), NFA recommends that the IB use the provided templates as a guide when drafting an SLA.

Net Capital Requirements

NFA Financial Requirements Section 5 defines the minimum net capital requirements for Independent IBs. If a member's adjusted net capital falls below its minimum net capital requirements, it must immediately notify the appropriate agencies of this deficiency. Refer to CTFC Regulation 1.12(a) for specific instructions for providing notice.

An IB may choose to not be subject to capital requirements by entering into a guarantee agreement with the FCM that carries the IB's accounts. 

Members subject to capital requirements should also be aware of restrictions imposed when adjusted net capital falls to a restrictive level. A member may not withdraw capital when it is below the Equity Withdrawal Restriction nor may it pay down a subordinated loan agreement if it is below the Suspended Repayment Restriction. Further, Members must maintain equity capital of at least 30% at all times.  

Financial Report Filings

Independent IBs must file financial reports with NFA on a periodic basis and all filings must be done electronically. Additionally, each financial report filed late will be subject to a fee of $1,000 for each business day it is late. Under Bylaw 1303, failure to pay the late fee within 30 days of the due date will be deemed by NFA as a request by the IIB to withdraw from NFA membership.