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Interactive Brokers (IBKR) Australia Fined for Trade Negligence
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Interactive Brokers Group, Inc.’s (IBKR - Free Report) local unit in Australia has been penalized for its failure to identify and respond effectively to suspicious trading activities by one of its clients. The Australian Securities & Investments Commission (“ASIC”) has fined IBKR AU$832,500 ($538,000) for the negligence.
The Market Disciplinary Panel (“MDP”) of the ASIC found that Interactive Brokers allowed an experienced trader to place orders with the intention of raising the closing price of an ASX-listed stock, Orthocell.
The activities of the client triggered 44 “marking the close” alerts on the brokerage firm’s own surveillance systems from Feb 10 to Oct 13, 2021.
Still, IBKR did not lodge a suspicious activity report with the regulator until Nov 5 despite being contacted by the ASIC on Oct 14 about the client’s suspicious activities.
The MDP considers such a delay as an insufficiency of staff with the necessary skills and experience to properly evaluate the alerts. It has been said that IBKR did not properly supervise the staff to ensure they were doing their jobs.
Interactive Brokers’ actions have also been considered reckless as the company allowed further suspicious trading even after the concerns raised by the ASIC. Further, the MDP pointed out that IBKR did not maintain the necessary organizational and technical resources to comply with the law.
Earlier this year, the ASIC issued two stop orders against Interactive Brokers Australia, temporarily preventing it from issuing Stock Yield Enhancement Program Derivatives to retail investors.
These stock lending products enable retail investors to lend securities to the broker, which then typically lends these securities to other parties for short selling. However, the regulator noted that IBKR inappropriately included investors in the target market that did not align with the features and risks of the product.
Over the past six months, shares of IBKR have gained 14% compared with the industry’s 5.9% rise.
Recently, a lawsuit was filed in the New York state court against Morgan Stanley (MS - Free Report) by private equity firms Certares Management LLC and Knighthead Capital Management LLC. The firms claim that MS used deceptive practices in relation to a credit agreement investment for a luxury high-speed rail line.
The firms are seeking at least $750 million in damages from Morgan Stanley. Certares and Knighthead claim that MS illicitly restructured a deal by which they invested in a loan to Miami-based Brightline Holdings.
Brightline, also a defendant in the lawsuit, is a Fortress Investment Group-backed company developing a Los Angeles-Las Vegas rail line.
Last month, The Goldman Sachs Group, Inc. (GS - Free Report) was charged with a civil penalty of $5.5 million, per the Commodity Futures Trading Commission’s (“CFTC”) order. The order required GS to cease and desist from committing future violations of the Commodity Exchange Act and CFTC’s record-keeping provisions.
Per CFTC’s findings, GS violated the provisions of a previous order, and failed to appropriately record and retain certain audio files.
In November 2019, Goldman was levied with a civil penalty of $1 million for failure to record the phone lines of its trading and sales desk in January and February 2014 for 20 calendar days. CFTC’s order required the company to cease and desist from further violations of record-keeping regulations.
However, post the 2019 order, Goldman continued to have record-keeping failures, which were in violation of the cease-and-desist provisions. It failed to record and retain audio calls due to failure in its hardware and software systems.
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Interactive Brokers (IBKR) Australia Fined for Trade Negligence
Interactive Brokers Group, Inc.’s (IBKR - Free Report) local unit in Australia has been penalized for its failure to identify and respond effectively to suspicious trading activities by one of its clients. The Australian Securities & Investments Commission (“ASIC”) has fined IBKR AU$832,500 ($538,000) for the negligence.
The Market Disciplinary Panel (“MDP”) of the ASIC found that Interactive Brokers allowed an experienced trader to place orders with the intention of raising the closing price of an ASX-listed stock, Orthocell.
The activities of the client triggered 44 “marking the close” alerts on the brokerage firm’s own surveillance systems from Feb 10 to Oct 13, 2021.
Still, IBKR did not lodge a suspicious activity report with the regulator until Nov 5 despite being contacted by the ASIC on Oct 14 about the client’s suspicious activities.
The MDP considers such a delay as an insufficiency of staff with the necessary skills and experience to properly evaluate the alerts. It has been said that IBKR did not properly supervise the staff to ensure they were doing their jobs.
Interactive Brokers’ actions have also been considered reckless as the company allowed further suspicious trading even after the concerns raised by the ASIC. Further, the MDP pointed out that IBKR did not maintain the necessary organizational and technical resources to comply with the law.
Earlier this year, the ASIC issued two stop orders against Interactive Brokers Australia, temporarily preventing it from issuing Stock Yield Enhancement Program Derivatives to retail investors.
These stock lending products enable retail investors to lend securities to the broker, which then typically lends these securities to other parties for short selling. However, the regulator noted that IBKR inappropriately included investors in the target market that did not align with the features and risks of the product.
Over the past six months, shares of IBKR have gained 14% compared with the industry’s 5.9% rise.
Image Source: Zacks Investment Research
Currently, IBKR carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Financial Misconduct by Other Firms
Recently, a lawsuit was filed in the New York state court against Morgan Stanley (MS - Free Report) by private equity firms Certares Management LLC and Knighthead Capital Management LLC. The firms claim that MS used deceptive practices in relation to a credit agreement investment for a luxury high-speed rail line.
The firms are seeking at least $750 million in damages from Morgan Stanley. Certares and Knighthead claim that MS illicitly restructured a deal by which they invested in a loan to Miami-based Brightline Holdings.
Brightline, also a defendant in the lawsuit, is a Fortress Investment Group-backed company developing a Los Angeles-Las Vegas rail line.
Last month, The Goldman Sachs Group, Inc. (GS - Free Report) was charged with a civil penalty of $5.5 million, per the Commodity Futures Trading Commission’s (“CFTC”) order. The order required GS to cease and desist from committing future violations of the Commodity Exchange Act and CFTC’s record-keeping provisions.
Per CFTC’s findings, GS violated the provisions of a previous order, and failed to appropriately record and retain certain audio files.
In November 2019, Goldman was levied with a civil penalty of $1 million for failure to record the phone lines of its trading and sales desk in January and February 2014 for 20 calendar days. CFTC’s order required the company to cease and desist from further violations of record-keeping regulations.
However, post the 2019 order, Goldman continued to have record-keeping failures, which were in violation of the cease-and-desist provisions. It failed to record and retain audio calls due to failure in its hardware and software systems.