3.4. Carrying Agreements

Introducing firms, also called fully disclosed firms, keep customer accounts but do not hold customer funds or securities or carry customer accounts themselves. Instead, they make arrangements with larger firms to maintain custody of their customers’ funds and securities, as well as provide back-office functions and compliance support. This kind of arrangement is called a carrying agreement, and firms capable of providing these services are called carrying firms. Also known as clearing firms, carrying firms handle customer orders and accounts, and they keep custody of their customers’ funds and securities.

Carrying agreements cannot go into effect until the carrying firm submits the agreement to FINRA and secures its approval. As early as possible, but not later than 10 business days before carrying any accounts of new introducing firms, the carrying firm must submit a notice to FINRA identifying each introducing firm by name and its CRD number.

Small introducing firms may not have the finances even to enlist the services of a clearing firm. In this case, they will contract for a smaller fee with another introducing firm and use the services of that broker’s carrying firm. These carrying agreements are also known as intermediary or piggyback arrangements, becaus