GREENWICH, CT – Interactive Brokers LLC has been slapped with a $700,000 penalty by the U.S. Commodity Futures Trading Commission (CFTC) for failing to accurately report large trader information and for inadequate supervision of its reporting processes. The CFTC issued its order on July 25, 2012, outlining the violations.
The order details that from January 2008 through at least January 2012, Interactive Brokers repeatedly submitted inaccurate large trader reports to the CFTC. Specifically, the firm failed to properly aggregate positions across related accounts, a key requirement for accurate market risk evaluation.
According to the CFTC, Interactive relied on an automated system for aggregating accounts, but this system lacked the necessary functionality to identify and combine accounts owned or controlled by the same traders. Despite recognizing the system’s shortcomings and repeated failures, Interactive did not take adequate steps to correct it.
The firm also failed to update Form 102s – reports identifying account holders and those exercising trading control – when traders opened new related accounts or changed their account information. The CFTC mandates these updates to properly assess potential market risks.
Interactive Brokers did not instruct its employees to submit updated Form 102s and provided no tools to help them determine when updates were necessary, contributing to the reporting failures. As a result of the settlement, Interactive Brokers is prohibited from future violations of Section 4g of the Commodity Exchange Act and related CFTC regulations.
The CFTC staff leading the investigation included Lindsey Evans, Margaret M. Sweet, Cynthia Cannon, Mary Beth Spear, Ava M. Gould, Scott Williamson, Rosemary Hollinger, and Richard Wagner.
Source: CFTC.gov
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