Who shares responsibility in a type 1 arrangement for non-financial compliance requirements?

Who shares responsibility in a type 1 arrangement for non-financial compliance requirements?

• A. Only the introducing broker
• B. Only the carrying broker
• C. Both introducing and carrying broker
• D. Neither broker

Answer: (C)

In a type 1 arrangement, both the introducing and carrying brokers share responsibility for non-financial compliance requirements. This collaborative responsibility is crucial because both parties are involved in the client relationship and have obligations to ensure that regulatory requirements and standards are met.

The introducing broker typically handles client interaction and account setup, while the carrying broker manages the execution, clearance, and settlement of transactions. However, compliance is not solely the responsibility of one party; both brokers must ensure that their practices adhere to regulatory expectations regarding conduct, customer protections, anti-money laundering protocols, and other non-financial obligations.

By sharing this responsibility, both brokers work together to create a framework that promotes integrity in their dealings and protects the interests of their clients and the broader financial system. Thus, it is vital for both brokers to remain vigilant and collaborate closely to uphold these standards. This alignment is essential for effective risk management and maintaining consumer trust in their services.