- The Securities and Exchange Commission (SEC) imposed an $11.5 million penalty on Interactive Brokers LLC to settle charges the company repeatedly failed to file Suspicious Activity Reports (SARs) for U.S. microcap securities trades executed on behalf of its customers.
- Separately, the Financial Industry Regulatory Authority (FINRA) and the Commodity Futures Trading Commission (CFTC) imposed fines of $15 million and $11.5 million, respectively, for anti-money laundering failures.
- The "multi-agency settlement reflects the seriousness we place on broker-dealers complying with their SAR reporting obligations and maintaining appropriate anti-money laundering controls," SEC New York Regional Office director Marc Berger said.
Broker-dealers are required to file SARs for transactions suspected to involve fraud or a lack of an apparent lawful business purpose.
According to the SEC, over a one-year period, Interactive Brokers failed to file more than 150 SARs to flag potential manipulation of microcap securities in its customers' account, some of the trading accounting for a significant portion of the daily volume in certain of the microcap issuers.
In addition, the company failed to recognize red flags concerning these transactions, to properly investigate suspicious activity, and to file SARs in a timely fashion, even when suspicious transactions were flagged.
"SAR filings are an essential tool in assisting regulators and law enforcement to detect potential violations of the securities laws, particularly in the microcap space," Berger said.
The SEC's order finds Interactive Brokers violated the financial recordkeeping and reporting provisions of the federal securities laws and a related SEC rule.
Without admitting to or denying the SEC’s findings, the company agreed to be censured, to cease and desist, and to pay an $11.5 million penalty. In its settlements with FINRA and the CFTC, the company agreed to retain an independent compliance consultant and to disgorge certain profits in addition to the penalties assessed.