Carrying Vs Non-Carrying Broker Dealer: key Differences and Key SEC Regulations

• Auditing and Assurance
• ||
• October 16, 2025

Do you know that all Broker-Dealers do not operate in the same way? One of the most important distinctions is whether they carry customer accounts or do not carry them. This distinction affects how they operate, their responsibilities, regulatory requirements, and how they handle customers.

To this, you need to understand all these aspects in detail with professional guidance. That’s why in this article, we are going to cover the essential elements of a broker-dealer that carries customer accounts and a non-carrying broker-dealer, how they differ, and their regulatory compliance.

What is a Broker-Dealer?

A broker-dealer is a firm or individual who buys and sells securities on behalf of their clients (acting as a broker) or for their own account (acting as a dealer).

Broker-dealers are regulated by the Securities and Exchange Commission (SEC) and by self-regulatory organizations such as FINRA.

Carrying Broker-Dealer

Carrying broker-dealer is a firm that maintains the entire lifecycle of customer account from execution to the settlement stage which includes maintaining the custody of customer assets, including cash and securities, and executing the trade on their behalf.

What do they do?

Carrying broker dealers perform a wide range of responsibilities that goes more than just executing trade on their behalf, they typically provide services like,

• Maintain and protect client’s accounts
• Safeguard the customer’s money and securities
• Responsible for managing the settlement process
• Facilitate Margin Accounts and Lending Services
• Handle Corporate Actions
• Offer Technology and Record-Keeping Systems

Key Characteristics

In order to get a clearer understanding of this, let’s understand the key characteristics of a broker-dealer carrying customer accounts:

1. Custody of Assets: They take possession of securities and funds belonging to their customers. This means the customer’s money and stocks are held on the broker-dealer’s books and records.
2. Account Handling: Carrying firms maintain customer account records, including statements, transaction histories, and account balances.
3. Clearing and Settlement: Carrying broker-dealers often clear and settle trades themselves or through affiliated clearing firms.
4. Higher Regulatory Burdens: Because they hold customer funds and securities, they are subject to more stringent regulatory requirements. They must comply with SEC Rule 15c3-3 (Customer Protection Rule), which protects customer assets and requires maintaining certain reserves and custody standards.
5. Risk Exposure: Carrying customer accounts exposes the broker-dealer to higher risk because it holds large sums of client money and securities. They must safeguard these assets carefully to avoid loss or theft.

Non-Carrying Broker-Dealer (Introducing Broker)

A non-carrying broker-dealer focus majorly on customer relationships, and they help clients with investment advice, order placement, and trade execution.

They are also called as an introducing broker or non-covered firm as they act as a financial intermediary that act as middleman, introducing clients to a larger, full-service broker-dealer (the “clearing firm”) for trade execution and back-office services. They are non-covered firm that does not hold customer accounts, funds, or securities.

What do they do?

They solely engaged in activities such as:

• Private placement agents work on a best-effort basis without holding customer securities or funds
• Mergers and acquisitions advisory firms referring transactions to other broker-dealers
• Provide platform or technology providers that do not receive or hold customer funds or securities

Key Characteristics:

In order to get a clear understanding of this, let’s understand the key characteristics of a non-carrying broker-dealer carrying customer accounts:

1. No Custody of Assets: They don’t physically hold customer funds or securities. Instead, they rely on carrying firms to do so.
2. Customer Account Records: The non-carrying broker-dealer may maintain some account information, but the official records and custody remain with the carrying firm.
3. Focus on Sales and Service: Non-carrying brokers typically focus on client relationships, trade execution, and advisory services rather than on back-office clearing and settlement.
4. Lower Regulatory Burden: Because they don’t hold assets, they face less rigorous regulations concerning asset custody. They still must comply with general broker-dealer regulations, but are not subject to the same strict custody rules.
5. Risk Management: Since they don’t hold customer funds, their risk exposure related to asset loss is much lower.

Difference between a carrying Broker-Dealer and a Non-Carrying Broker-Dealer

First, we will understand the difference between the two based on capital requirements, which is the most critical factor under SEC rules.

Capital Requirements: A Quick Look

Operational Differences

The differences between carrying and non-carrying broker-dealers also play out in their day-to-day operations, including the office requirements, specific responsibilities, etc.

SEC Regulatory Requirements

SEC Rule 15c3-3 (Customer Protection Rule) is central to understanding why carrying broker-dealers face more stringent regulations. You can think of this rule as a safeguard for investors — it basically makes sure that broker-dealers keep enough money in reserve to protect their customers’ funds and securities. In simple terms, it’s there to prevent any chance of misuse and to ensure that your assets are always safe and available when you need them.

• Carrying Broker-Dealers have additional responsibilities because they hold customer funds and securities. They must:
  • Maintain physical possession or control of customer securities (so clients’ assets are always safeguarded).
  • Keep a special reserve account of funds to protect customers in case the firm faces financial trouble or insolvency.
  • Perform daily or weekly reserve computations for the customer and PAB reserve bank account no later than six months after exceeding the $500 million threshold (daily for large carrying firms, weekly for others).

Please note that there are Amendments to Rule 15c3-3 and Rule 15c3-1,

In which the SEC notified firms that hold customer assets and have average total credits of $500 million or more must now calculate their customer reserve requirements every day instead of weekly. This helps ensure they always have enough funds set aside to safeguard customer assets, even if markets fluctuate or customers withdraw money.

At the same time, the SEC made a related change to the Net Capital Rule (Rule 15c3-1). Broker-dealers performing daily reserve calculations can now reduce their capital buffer from 3% to 2%, since daily monitoring provides better accuracy and lowers risk.

The SEC has extended the compliance deadline for these changes to June 30, 2026, allowing firms additional time to get ready. File periodic reports with regulators, showing compliance with these financial protection rules.

• Non-Carrying Broker-Dealers, They don’t hold customer cash or securities themselves. Because of that, they’re exempt from many of these customer protection requirements. However, they must make sure that the clearing or carrying firm they use complies with all these rules and must maintain strong supervisory controls over their operations.

Custozer Protection and Risk

The difference in asset custody also means different levels of risk for customers and broker-dealers.

• Carrying Broker-Dealer Risk: Because these firms hold customer funds, they bear greater responsibility for protecting those assets. Failure to safeguard customer securities can lead to regulatory action, fines, and loss of license. Additionally, customers have a single point of contact for both trading and custody.
• Non-Carrying Broker-Dealer Risk: These firms rely on the carrying broker to hold assets securely. The risk to the customer is mitigated by having a specialized firm responsible for custody. However, if the carrying firm fails, customers may face delays or complications in accessing their funds.

Final Thoughts

Understanding the distinction between the carrying broker dealer and a non-carrying broker dealer  helps investors know who is responsible for their assets and how broker-dealers operate behind the scenes in the complex financial system.

The regulatory, operational, and financial differences between them is  very crucial for both compliance and smooth functioning. Therefore, navigating these distinctions, adhering to SEC and FINRA regulations, and ensuring proper reporting and accounting processes can be complex. To navigate all those complexities of the modern financial landscape with precision and personalized attention today you need a professional who provide end to end assistance for this, for more information regarding this feel free to contact our professional.

At Mercurius, our team of experienced professionals, including PCAOB-registered broker-dealers and public accountants, assists in establishing robust accounting systems, fulfilling capital adequacy norms, maintaining regulatory compliance, and preparing accurate financial and audit reports.