Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

What is a Guaranteed Introducing Broker?

1. A broker without any contractual obligations

2. An introducing broker-dealer with an exclusive agreement

3. A futures trader with no affiliation

4. A broker solely focused on retail clients

The correct answer is: An introducing broker-dealer with an exclusive agreement

A Guaranteed Introducing Broker refers to an introducing broker-dealer that operates under an exclusive or guaranteed agreement with a clearing firm. This kind of arrangement typically allows the introducing broker to introduce clients to the clearing firm, which then handles order execution and settlement. The "guaranteed" aspect indicates that the clearing firm provides certain guarantees regarding the management of client funds and the execution of trades. This partnership facilitates a seamless experience for clients and ensures that the introducing broker has the support and backing of a larger financial institution. The other options do not correctly reflect the nature of a Guaranteed Introducing Broker. A broker without contractual obligations would not be “guaranteed” and lacks the benefits that come from a formalized relationship with a clearing firm. A futures trader with no affiliation does not pertain to the concept of an introducing broker, as they are not acting in that intermediary capacity. Similarly, focusing solely on retail clients does not encompass the full range of services or agreements that define a Guaranteed Introducing Broker. Therefore, option B accurately captures the essential characteristics and function of a Guaranteed Introducing Broker in the financial industry.