Interactive Brokers Settles Nasdaq Charges, Agrees to $475,000 Fine
Publicly
traded on the Nasdaq, the online brokerage firm Interactive Brokers (NQ: IBKR) has
agreed to pay a $475,000 fine to settle charges brought by the exchange. The
alleged violations pertained to five different “corporate actions,”
including sending orders with incorrect prices.
The Letter
of Acceptance, Waiver and Consent (AWC) released by the exchange states that
between January 2020 and June 2021, Interactive Brokers failed to properly
process several corporate actions, such as reverse stock splits, due to
deficiencies in its supervisory systems.
This
resulted in the firm sending orders to the market with incorrect prices in some
cases. In two instances, Interactive Brokers’ procedures also allowed customers to sell shares they did not own.
“As a
result of its investigation, Nasdaq Enforcement determined that during the
Relevant Period, the Firm incorrectly processed five corporate actions due to a
combination of system and supervisory deficiencies,” Nasdaq commented in the
AWC.
Nasdaq
found that Interactive Brokers violated its rules requiring member firms to
establish and maintain supervisory systems reasonably designed to ensure
compliance. The exchange also determined that the brokerage’s risk management controls for erroneous orders were inadequate in certain scenarios,
especially for orders involving warrants.
While
neither admitting nor denying the findings, Interactive Brokers agreed to the
censure and $475,000 fine and to address the issues. The firm has reportedly
taken remedial steps, including compensating harmed customers.
Other Interactive Brokers’
Fines
Interactive
Brokers, which has been a Nasdaq member since 2006, provides online trade
execution and clearing services to institutional and individual investors. The
firm has no prior relevant disciplinary history with the exchange.
However, over
the past six years, Interactive Brokers has faced several fines and penalties
from other regulatory authorities. In 2018, the company was hit with a
substantial $5.5 million fine by the Financial Industry Regulatory Authority
(FINRA) for violating Security and Exchange Commission (SEC) Regulation SHO and
supervisory failings related to naked short positions for at least three years.
The
following year, in 2019, Interactive Brokers agreed to pay $100,000 in fines to
settle multiple charges with New Jersey’s Division of Consumer Affairs and the
Bureau of Securities. However, the most significant penalty came in 2020 when
the broker was slapped with a combined $38 million penalty in settlements with
three US regulators over several anti-money laundering breaches, including
failing to file suspicious activity reports (SARs).
In the same
year, NYSE Arca, an electronic US trading exchange, fined Interactive Brokers
$237,500 for alleged violations in trade reporting. Additionally, FINRA imposed
a financial penalty of $25,000 on Arnold J. Feist, a former AML Compliance
Officer (AMLCO) of Interactive Brokers, for severe lapses in performing his
duties. Concurrently, the National Futures Association (NFA), the United
States’ derivatives industry watchdog, fined Interactive Brokers $250,000.
Most
recently, in September 2023, the Australian financial markets regulator slapped
the local unit of Interactive Brokers with a monetary penalty of AU$832,500
(approximately $538,000) for being “negligent” in its failure to identify
suspicious trading conducted by one of its clients.
Publicly
traded on the Nasdaq, the online brokerage firm Interactive Brokers (NQ: IBKR) has
agreed to pay a $475,000 fine to settle charges brought by the exchange. The
alleged violations pertained to five different “corporate actions,”
including sending orders with incorrect prices.
The Letter
of Acceptance, Waiver and Consent (AWC) released by the exchange states that
between January 2020 and June 2021, Interactive Brokers failed to properly
process several corporate actions, such as reverse stock splits, due to
deficiencies in its supervisory systems.
This
resulted in the firm sending orders to the market with incorrect prices in some
cases. In two instances, Interactive Brokers’ procedures also allowed customers to sell shares they did not own.
“As a
result of its investigation, Nasdaq Enforcement determined that during the
Relevant Period, the Firm incorrectly processed five corporate actions due to a
combination of system and supervisory deficiencies,” Nasdaq commented in the
AWC.
Nasdaq
found that Interactive Brokers violated its rules requiring member firms to
establish and maintain supervisory systems reasonably designed to ensure
compliance. The exchange also determined that the brokerage’s risk management controls for erroneous orders were inadequate in certain scenarios,
especially for orders involving warrants.
While
neither admitting nor denying the findings, Interactive Brokers agreed to the
censure and $475,000 fine and to address the issues. The firm has reportedly
taken remedial steps, including compensating harmed customers.
Other Interactive Brokers’
Fines
Interactive
Brokers, which has been a Nasdaq member since 2006, provides online trade
execution and clearing services to institutional and individual investors. The
firm has no prior relevant disciplinary history with the exchange.
However, over
the past six years, Interactive Brokers has faced several fines and penalties
from other regulatory authorities. In 2018, the company was hit with a
substantial $5.5 million fine by the Financial Industry Regulatory Authority
(FINRA) for violating Security and Exchange Commission (SEC) Regulation SHO and
supervisory failings related to naked short positions for at least three years.
The
following year, in 2019, Interactive Brokers agreed to pay $100,000 in fines to
settle multiple charges with New Jersey’s Division of Consumer Affairs and the
Bureau of Securities. However, the most significant penalty came in 2020 when
the broker was slapped with a combined $38 million penalty in settlements with
three US regulators over several anti-money laundering breaches, including
failing to file suspicious activity reports (SARs).
In the same
year, NYSE Arca, an electronic US trading exchange, fined Interactive Brokers
$237,500 for alleged violations in trade reporting. Additionally, FINRA imposed
a financial penalty of $25,000 on Arnold J. Feist, a former AML Compliance
Officer (AMLCO) of Interactive Brokers, for severe lapses in performing his
duties. Concurrently, the National Futures Association (NFA), the United
States’ derivatives industry watchdog, fined Interactive Brokers $250,000.
Most
recently, in September 2023, the Australian financial markets regulator slapped
the local unit of Interactive Brokers with a monetary penalty of AU$832,500
(approximately $538,000) for being “negligent” in its failure to identify
suspicious trading conducted by one of its clients.
