FINRA Rule 4311 — Carrying Agreements
Overview
FINRA Rule 4311 governs the carrying agreements between introducing broker-dealers and carrying (clearing) firms. These agreements are the contractual foundation of the correspondent clearing relationship, defining which firm is responsible for each function — from trade execution and customer account maintenance to regulatory reporting and recordkeeping.
The rule requires that these agreements be in writing, approved by FINRA prior to implementation, and clearly allocate responsibilities between the parties. This ensures that no regulatory obligation falls through the cracks and that both firms understand their respective duties.
Official citation: FINRA Rule 4311
Who It Applies To
Rule 4311 applies to all FINRA member firms that enter into carrying agreements, whether as the introducing firm or the carrying (clearing) firm. This includes fully disclosed and omnibus clearing arrangements.
Key Requirements
- Written agreement required: All carrying arrangements must be documented in a written agreement signed by both parties.
- Prior FINRA approval: Carrying agreements must be submitted to and approved by FINRA before they take effect. FINRA reviews the agreement to ensure responsibilities are clearly allocated.
- Allocation of responsibilities: The agreement must clearly specify which firm is responsible for each regulatory function, including: account opening, order execution, confirmation delivery, account statements, recordkeeping, and regulatory reporting.
- Advance notice: The carrying firm must provide FINRA with notice as early as possible, but not later than 10 business days before entering into a new introducing firm relationship.
- Amendment procedures: Material changes to carrying agreements must be documented and submitted to FINRA for review.
- Termination provisions: Agreements must include provisions for orderly termination, including procedures for transferring customer accounts.
How Loffa Helps You Comply
Prime Broker Interactive Network (PBIN)
- Agreement lifecycle management: PBIN manages the full lifecycle of carrying agreements — from creation and negotiation through execution, amendment, and termination.
- Responsibility allocation tracking: PBIN's agreement templates include structured fields for allocating each regulatory responsibility, ensuring nothing is overlooked.
- FINRA submission support: PBIN maintains all documentation needed for FINRA's pre-approval review process, streamlining the submission of new and amended agreements.
- Introducing firm onboarding: PBIN facilitates the 10-business-day advance notice process for new introducing firm relationships, tracking notification dates and FINRA acknowledgments.
Recent Updates
- Responsibility clarity: FINRA has emphasized the importance of clear, unambiguous responsibility allocation in carrying agreements, particularly around areas like anti-money laundering, suspicious activity reporting, and cybersecurity.
- Digital agreements: FINRA now accepts electronically executed carrying agreements, provided they meet applicable e-signature and recordkeeping requirements.
Official Sources
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