Greenwich, Connecticut – Interactive Brokers LLC (IB) has been ordered to pay a $225,000 civil monetary penalty by the U.S. Commodity Futures Trading Commission (CFTC) for multiple regulatory violations, announced April 9, 2013. The CFTC found that IB, an online brokerage firm serving over 140,000 customers, failed to properly calculate and maintain customer funds in segregated accounts.
According to the CFTC’s order, from January 2008 through April 4, 2011, IB did not accurately compute the amount of customer funds required to be on deposit, nor the amount actually held in segregated accounts for commodity and options customers. Further, between September 21, 2011, and May 8, 2012, IB improperly used Japanese yen and Swiss francs to cover its U.S. dollar-denominated obligations, a practice undertaken to maximize interest earnings rather than at the request of customers.
This practice resulted in a shortfall of U.S. dollars in segregation, ranging from approximately $90 million to $300 million during the relevant period. IB self-reported the violation to the CFTC on May 10, 2012. While the company maintained excess segregated funds ranging from $48.4 million to $455.3 million overall, the CFTC determined the improper currency coverage constituted a violation of regulations.
The order also cites IB’s failure to implement adequate procedures and training for its employees to prevent these violations prior to May 9, 2012. However, the CFTC acknowledged that IB independently implemented corrective measures and cooperated with the Division of Enforcement during the investigation. The CFTC order requires IB to cease and desist from the charged violations.
The investigation was led by CFTC staff members Allison Passman, Heather Johnson, Susan Gradman, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner. The National Futures Association also provided assistance in the matter.
Source: CFTC.gov
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