Interactive Brokers Group, Inc. Rotten Score Breakdown

Interactive Brokers LLC agreed in August 2020 to pay more than $38 million in combined penalties in parallel enforcement actions by the U.S. Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and the Commodity Futures Trading Commission (CFTC) concerning failures in its anti-money-laundering program and suspicious-activity reporting. The SEC found that Interactive Brokers repeatedly failed to file Suspicious Activity Reports (SARs) for potentially suspicious transactions involving U.S. microcap securities. According to the SEC, during a one-year period Interactive Brokers failed to file more than 150 SARs concerning transactions that displayed red flags for possible market manipulation. The SEC also found deficiencies in Interactive Brokers' investigation and reporting of suspicious activity. In some instances, suspicious transactions identified by compliance personnel were not reported in a timely manner. FINRA separately found widespread deficiencies in Interactive Brokers' anti-money-laundering compliance program lasting more than five years. According to FINRA, Interactive Brokers failed to reasonably surveil hundreds of millions of dollars in wire transfers. These included transfers involving customers and third parties located in jurisdictions considered high risk for money laundering. FINRA also found that Interactive Brokers lacked sufficient compliance personnel and adequate systems to investigate potentially suspicious activity. Interactive Brokers ultimately agreed to pay $11.5 million to the SEC, $15 million to FINRA and $11.5 million to the CFTC, resulting in combined penalties exceeding $38 million. The enforcement actions required Interactive Brokers to improve its anti-money-laundering compliance, surveillance and reporting systems. Primary sources: U.S. Securities and Exchange Commission — Interactive Brokers to Pay $11.5 Million for AML Failures: https://www.sec.gov/newsroom/press-releases/2020-178 FINRA — Interactive Brokers LLC Letter of Acceptance, Waiver and Consent: https://www.finra.org/sites/default/files/2020-08/Interactive-brokers-awc-081020.pdf

Interactive Brokers agreed in September 2023 to pay $55 million in combined penalties imposed by the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) over widespread failures to preserve electronic business communications required by federal securities and commodities laws. The SEC found widespread and longstanding use of unapproved communication methods by employees at multiple levels of authority. According to the SEC, employees communicated about company business through personal text messages and other unauthorized messaging platforms instead of communication systems monitored and preserved by the company. The conduct was not limited to junior employees. The SEC stated that employees at multiple levels of authority participated in the use of off-channel communications, including supervisors and senior managers. Interactive Brokers failed to maintain and preserve the substantial majority of these communications as required under federal recordkeeping rules. The SEC stated that failures to preserve required communications can interfere with regulatory investigations because potentially relevant communications may be unavailable to investigators. Interactive Brokers Corp. and Interactive Brokers LLC agreed to pay a $35 million civil penalty to resolve the SEC action. Interactive Brokers disclosed that the entities also paid $20 million to the Commodity Futures Trading Commission in a parallel enforcement action, bringing the combined penalties to $55 million. The SEC censured the firms and ordered them to cease and desist from future violations. Interactive Brokers was also required to retain an independent compliance consultant to conduct a comprehensive review of its policies and procedures concerning electronic communications and employee use of personal devices and messaging applications. The enforcement action formed part of a broader regulatory crackdown on financial institutions that failed to preserve business communications conducted through unauthorized messaging channels. Primary sources: U.S. Securities and Exchange Commission — SEC Charges 10 Firms with Widespread Recordkeeping Failures: https://www.sec.gov/newsroom/press-releases/2023-212 Interactive Brokers Group 2023 Form 10-K: https://www.sec.gov/Archives/edgar/data/1381197/000138119724000083/ibkr-20231231x10k.htm