On March 23, the Financial Industry Regulatory Authority (FINRA) announced that it was conducting a retrospective review of FINRA Rule 4311 for transfer agreements. As part of its review, FINRA sought advice to determine the effectiveness and efficiency of the rule. Introduction/transport agreements are entered into to allow one member (the broker “importer”) to use the back-office facilities of another member (the broker “holder”). The services offered may include any combination of: this agreement exists between an introductory broker and a carrier broker for the purpose of setting up a type (1-4) of an introductory/transport brokerage agreement. A type (1-4) of introduction/brokerage is one of four introductory carrying brokerage agreements in which an introductory broker can introduce clients to a carrier broker. In this agreement, the broker type (1-4) agreed to provide certain services, including clearing and registration activities for the type (1-4) of importing broker. The agreement is requested by IIROC in accordance with Introducing/Carrying Broker Rule 35. IIROC must approve the agreement before it enters into force. Carrying brokers will also compete on the basis of the different markets and types of products that their clients can access through them. For example, if a brokerage client wants to start trading on a new exchange or with a rare financial instrument, the bearer broker should be able to meet that demand. The rule sets out the requirements for FINRA members when entering into accounts receivable transfer agreements.
It prohibits FINRA members, unless FINRA otherwise authorises it, from entering into a contract for the participation of a client account on which securities transactions may be carried out, unless the exporting company is a member of FINRA. The rule also requires the organizing company to obtain permission from FINRA before such an agreement takes effect. A carrying broker is a brokerage firm that provides back-office support for other brokers. Such support is compliance with legislation, registration and distribution of client documents, as well as credit risk monitoring for Margin accounts. .03 Due diligence. For the purposes of subsection (b) (4) of this Rule, the duty of care of the affiliate company may include without limitation an examination of the importing company`s business model and product range, ownership and customer positions, focus and similar reports, audited financial statements, and the history of complaints and disciplinary proceedings by the exporting company. .05 Notice to customers. For the purposes of paragraph (d) of this Rule, it is not necessary to notify customers of a change in any of the parties to the contract of carriage if, in accordance with the applicable FINRA rules and federal securities laws, the accounts of such customers are transferred in accordance with (a) ACATS, using an authorized transfer instruction (TIF); or (b) a process outside of ACATS in which customers are informed of an alternative mechanism, such as a positive or negative response. Similarly, carrier brokers will strive to maintain high standards of customer service while offering competitive fees.
Carrying Broker often provides clients with dedicated account managers who can solve any problems that arise….