Which type of broker arrangement has the least responsibility for introducing brokers?

Which type of broker arrangement has the least responsibility for introducing brokers?

• A. Type 2
• B. Type 1
• C. Type 4
• D. Type 3

Answer: (B)

The option that reflects a broker arrangement with the least responsibility for introducing brokers is indeed the one that is identified as Type 1. In this arrangement, the introducing broker typically has minimal fiduciary duties or responsibilities towards the clients they refer. They primarily serve as a bridge between the client and the brokerage, focusing on making introductions without undertaking extensive oversight or compliance obligations linked to the transactions.

This arrangement often allows introducing brokers to operate with a degree of independence and freedom, as they are not deeply involved in the ongoing management or direct interaction with clients after the introduction is made. Consequently, the degree of responsibility in managing client accounts and ensuring compliance falls heavily on the brokerage, not the introducing brokers themselves.

In contrast, other types of broker arrangements tend to involve more extensive duties, such as ongoing client communication or compliance with regulatory requirements, which increase the responsibilities held by the brokers involved. The Type 1 structure, therefore, provides the least amount of responsibility when it comes to managing the introduced clients.