Interactive Brokers Agrees to $475,000 Fine in Nasdaq Settlement

Interactive Brokers has agreed to pay a fine of $475,000 to resolve charges brought by the Nasdaq exchange. The charges relate to five different actions taken by the company, including sending orders with incorrect prices.

Interactive Brokers Aims To Address The Regulatory Issues Identified By Nasdaq

The Letter of Acceptance, Waiver, and Consent (AWC) from the exchange, highlighted the inability of Interactive Brokers to handle corporate actions. The letter explains that between January 2020 and June 2021, Interactive Brokers did not correctly handle several corporate actions. This was because their supervisory systems had shortcomings.

Nasdaq’s comment in the AWC stated that during the period, the Firm made mistakes in processing five corporate actions because of problems with their systems and supervision.

Because of this, the company ended up sending orders to the market with the wrong prices in some cases. Also, in two situations, Interactive Brokers’ procedures allowed clients to sell shares they didn’t own.

Nasdaq discovered that Interactive Brokers broke its rules by not having proper supervisory systems in place to ensure compliance. The exchange also found that the brokerage’s controls for managing risks with incorrect orders weren’t good enough in some cases, especially when dealing with warrants.

Interactive Brokers neither admitted nor denied the findings, but agreed to the censure and $475,000 fine, and committed to fixing the issues. The company has reportedly taken steps to make things right, including compensating customers who were affected.

Interactive Brokers Seeks To Ensure Compliance With Regulatory Requirements

Interactive Brokers, a member of Nasdaq since 2006, offers online trading and clearing services to both individual and institutional investors. The company has not previously been disciplined by the exchange for similar matters.

However, in the last six years, Interactive Brokers has faced several penalties and fines from other regulatory bodies. In 2018, the firm was fined a significant $5.5 million by the Financial Industry Regulatory Authority (FINRA).

This fine was imposed for breaking the Security and Exchange Commission (SEC) Regulation SHO and for not properly supervising naked short positions for at least three years.

In 2019, Interactive Brokers agreed to pay a fine of $100,000 to resolve numerous charges with New Jersey’s Division of Consumer Affairs and the Bureau of Securities.

However, the most notable penalty came in 2020 when the broker was fined a total of $38 million in settlements with three regulators in the US for numerous anti-money laundering breaches. These breaches included failing to file suspicious activity reports (SARs).