Introduction

If you`re looking to expand your business and enter new markets, becoming an introducing broker can be a great strategy. An introducing broker (IB) is a company or individual who introduces clients to a brokerage firm in exchange for commissions. In Hong Kong, the Securities and Futures Commission (SFC) regulates the activities of brokers and IBs, and requires them to enter into an introducing broker agreement (IBA) to establish the terms and conditions of their relationship. In this article, we`ll explain what an introducing broker agreement is and why it`s important to have one.

What is an Introducing Broker Agreement?

An introducing broker agreement is a contract between a brokerage firm and an introducing broker. The agreement outlines the terms and conditions of the relationship between the two parties, and sets out the responsibilities and obligations of each. The agreement typically covers areas such as commission rates, payment terms, client solicitation, and compliance with regulatory requirements.

Why do You Need an Introducing Broker Agreement?

Entering into an introducing broker agreement is essential for both the brokerage firm and the introducing broker. For the brokerage firm, the agreement provides a clear understanding of the terms and conditions of the relationship with the introducing broker, including the commission rates and payment terms. It also helps to ensure that the introducing broker is acting in compliance with regulatory requirements.

For the introducing broker, the agreement sets out the responsibilities and obligations of the parties, and provides a clear understanding of the commission structure and payment terms. It also protects the introducing broker`s reputation by ensuring that they are not associated with any unethical or illegal activities by the brokerage firm.

Key Components of an Introducing Broker Agreement

Here are some of the key components of an introducing broker agreement:

1. Commission Rates: The agreement should clearly state the commission rates that the brokerage firm will pay the introducing broker for each client referral.

2. Payment Terms: The agreement should specify the payment terms, including when commissions will be paid and how they will be calculated.

3. Client Solicitation: The agreement should outline the rules and regulations regarding client solicitation, including any restrictions on advertising, marketing, or other promotional activities.

4. Compliance with Regulatory Requirements: The agreement should specify that the introducing broker must comply with all applicable laws and regulations, including those of the SFC.

Conclusion

An introducing broker agreement is a crucial component of any IB-broker relationship in Hong Kong. It helps to establish the terms and conditions of the relationship, set out the responsibilities and obligations of both parties, and ensure compliance with regulatory requirements. By having a clear and comprehensive IBA, both the brokerage firm and the introducing broker can benefit from a mutually beneficial relationship that fosters growth and success.

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