The cheque arrives monthly, the work looks like marketing, and the paperwork is one referral agreement. That is why introducing broker status is the most casually assumed position in the industry, and why the people who assume it are the ones who get a letter.
The activity test, not the job title
No regulator cares what your contract calls you. They look at what you do. Introducing a prospect to a broker, with no advice and no involvement in orders or money, is at the light end and in many places sits outside investment services entirely. Move one step along and it changes: recommending a product to a specific person is advice. Passing a client's order to the broker is reception and transmission of orders. Taking the client's money, even briefly, is handling client funds. Each of those is a regulated activity in supervised markets, and doing it without permission is the offence.
The United States is the clearest example of the other end of the scale. Firms soliciting or accepting orders for futures and certain retail forex business register with the Commodity Futures Trading Commission and are members of the National Futures Association, with introducing broker as a defined registration category and associated persons registered individually. That structure is described in the NFA and CFTC regime for US forex. Assuming a light touch referral model applies to US clients is the fastest way into an enforcement file.
Where the client lives is the question
An IB in a jurisdiction with no specific regime, introducing clients in a strictly supervised one, is still promoting a financial product into that supervised market. Financial promotion rules attach to where the promotion is received. That is why the same activity can be unremarkable for one client base and unlawful for another.
For EU retail clients, promotion of these products is restricted, and firms outside the bloc cannot solicit into it on the basis that the client came to them, except in the narrow terms discussed in reverse solicitation. For UK clients, financial promotions must be made or approved by an authorised person. Practical detail on the commercial side of the relationship is in the introducing broker programme guide.
IB, tied agent, affiliate
| Role | Typical activity | Registration position |
|---|---|---|
| Affiliate | Traffic and tracked links, no client contact | Usually outside investment services, still bound by promotion and advertising rules |
| Introducing broker | Named introductions, ongoing client relationship, sometimes support | Registration required in some regimes, notification in others, none in a few |
| Tied agent | Acts under one principal's permissions, may advise and transmit orders | Register entry, principal carries responsibility |
The boundary that matters is advice and order handling. An IB that talks a client through a position size has crossed into territory that most supervised regimes treat as regulated, whatever the agreement says. If the role genuinely includes advice, the honest answer is the tied agent route or your own permission, not a referral contract with a wider job description.
Commission structures draw attention. Volume based pay for introducing retail clients to leveraged products creates an incentive conflict supervisors already know about, and it interacts with rules on inducements and on marketing. Have your remuneration model reviewed alongside your registration position.
What the broker will ask you for
Any broker worth partnering with runs know your business on its introducers, because the broker's own regulator holds it responsible for the flow it accepts. Expect incorporation documents, ownership and control, identification of beneficial owners, screening against sanctions and politically exposed persons lists, a description of your marketing channels, sample creatives, the countries you will target, and confirmation of what you will and will not say to clients. The general shape is in know your business checks for firms.
Brokers that ask for none of this are telling you something about their own compliance, and their problems eventually become your payment problems.
Banking commission income
IB commission looks simple until an onboarding officer sees regular inbound payments from a leveraged trading firm, sometimes offshore, sometimes in a currency that does not match the entity's country. The questions that follow are standard: what is the underlying business, who are the counterparties, where do the clients live, what licence does the payer hold. A file that answers those with a signed agreement, an invoice trail and a consistent story usually opens. A file that describes the business vaguely tends to sit.
Two specifics recur. Payment from a jurisdiction on a heightened monitoring list attracts extra diligence for reasons covered in the effect of FATF listings. And an IB that also receives client funds, even as a convenience, changes category entirely and should expect account closure. Keep commission and client money strictly apart, in fact and on paper.
The version worth running
A defensible IB business names its target countries and checks each one against the broker's permissions. It keeps a written record of what its people may say. It stores its promotional material with dates. It runs the same screening on itself that it expects the broker to run. And it takes local legal advice for any market where the client base becomes material, rather than assuming the position it took in year one still holds. Registration status is a legal question about a specific set of facts, and the facts change as the book grows.
"Every introducer thinks the line is where the money moves. The line is where the advice starts, and most people cross it in a friendly phone call."
— The SGHK Team
Key Takeaways
- Registration follows the activity, not the contract title. Advice, order transmission and handling funds are the steps that trigger it.
- Promotion rules attach where the client receives the promotion, so the same referral model can be fine in one country and unlawful in another.
- US retail forex and futures introduction sits inside a defined registration regime, so treat US clients as a separate decision entirely.
- Never let client money touch an IB account. Mixing commission and client funds changes your regulatory category and closes bank accounts.
Frequently Asked Questions
Do introducing brokers always need a licence?
No. Some jurisdictions treat pure introduction as outside investment services, others require registration or notification. The answer depends on your activity and on where your clients are, so it needs local legal advice.
What separates an affiliate from an introducing broker?
An affiliate sends traffic and has no client relationship. An introducing broker names and keeps clients and often supports them, which is where advice risk begins.
Can an introducing broker collect client deposits?
No. Receiving client funds is a regulated activity and it also breaks the banking profile of a commission business. Deposits go directly to the broker's segregated accounts.
About SGHK
SGHK is a FinTech company that designs and builds its own software for the trading industry: the eTrader trading platform, Launch your Broker and Launch your Prop Firm. Every product is written, hosted and supported in-house and licensed to trading firms, with the CRMs branded to them, all hosted by us in the cloud, managed by each firm and built to scale across clustered servers as our clients grow. Everything is encrypted, and each firm is the only one with access to its data and its clients' data.