Compliance Requirements for Introducing Broker (IB) Applicants
Independent Introducing Broker (IB)
- A financial statement certified by an independent public accountant as of a date not more than 45 days prior to the date on which such report is filed; or
- A financial statement as of a date not more than 17 business days prior to the date on which such report is filed and a financial statement certified by an independent public accountant as of a date not more than one year prior to the date on which such report is filed; or
- A financial statement as of a date not more than 17 business days prior to the date on which such report is filed. Please be aware that with this option, the firm will be subject to an examination by NFA within 6 months of becoming registered. (This option is not available to a firm switching from Guaranteed to Independent; these firms must provide a certified statement as part of the application in accordance with option 1 or option 2.)
See NFA Financial Requirements Section 5 to determine the firm's net capital requirement. Generally, NFA expects an IB to maintain adjusted net capital of at least $50,000 to ensure that the firm does not fall below the capital requirement if it incurs unexpected liabilities.
If applying as a guaranteed IB, the firm must file the appropriate guarantee agreement and will not be subject to the minimum net capital or financial reporting requirements. The Form 1 FR-IB Part B (Guarantee Agreement) is the only acceptable form for a guarantee agreement.
General IB Compliance Documentation
Both independent and guaranteed IBs may also need to provide compliance procedures, additional documents and written representation to NFA for review as part of the application. Such procedures, documents and written representation would generally include, but are not limited to:
- Anti-Money Laundering Procedures
- Business Continuity and Disaster Recovery Procedures
- Cybersecurity Procedures
- Supervision of the Use of Automated Order-Routing Systems
- Promotional Material Procedures
- Supervision of Associated Persons Procedures
- Customer Complaint Procedures
- Source of Assets Letter, describing the source of the firm's current assets (including the names of any individuals and/or entities that have contributed capital to the firm and the amount of capital contributed by each individual and/or entity) and represents that the capital has been contributed for the purpose of operating the business and will continue to be used for such purpose as required by CFTC Regulation 1.10. The Source of Assets Letter should be signed by a Principal of the firm and on firm letterhead.
- For securities broker/dealers, a copy of the most recent report from the securities DSRO and the firm's response
- If the firm has been examined by another regulatory agency, a copy of the most recent report
- Copies of Subordinated Loan Agreements (if applicable)
- If IB will be conducting retail off-exchange forex business, a copy of any signed agreements the firm has entered into with counterparties
- Financial statements. 1-FR-IB filers must file all financial statements electronically through EasyFile. FOCUS filers must file all unaudited financial statements electronically through WinJammerTM.
As NFA is conducting a review of the firm's financial operations, NFA will often request additional items not listed above, such as bank statements, general ledger, and cancelled checks. An IB will not be approved until NFA reviews and approves all requested items. These financial or procedural items can be submitted to NFA via email at Applicants@nfa.futures.org.