The Financial Industry Regulatory Authority (FINRA) has imposed a $3.5 million fine on Interactive Brokers LLC for failing to comply with the rules regarding price reporting and execution of customer orders. The violations occurred between January 2014 and February 2023, affecting thousands of customers and millions of transactions.

FINRA Finds Multiple Rule Violations by Interactive Brokers

According to FINRA, Interactive Brokers violated several rules that are designed to protect customers from unfair or inaccurate prices and ensure fair and orderly markets. These rules include:

  • Rule 5310, which requires firms to use reasonable diligence to ascertain the best market for a customer order and execute the order at the best price possible under prevailing market conditions.
  • Rule 6380A, which requires firms to report transactions in NMS stocks to the FINRA/Nasdaq Trade Reporting Facility (TRF) within 10 seconds of execution.
  • Rule 7440, which requires firms to record and report accurate and complete information about transactions to the FINRA/Nasdaq TRF, including the time of execution, the price, the size, and the capacity in which the firm acted.
  • Rule 2010, which requires firms to observe high standards of commercial honor and just and equitable principles of trade.

FINRA found that Interactive Brokers failed to use reasonable diligence to obtain the best execution for its customers, failed to report transactions to the FINRA/Nasdaq TRF in a timely and accurate manner, and failed to maintain and preserve records of transactions as required by the rules. As a result, Interactive Brokers deprived its customers of the opportunity to receive better prices, caused inaccuracies and delays in the public dissemination of trade information, and hindered FINRA’s ability to monitor and regulate the market.

Interactive Brokers Admits the Facts and Agrees to Pay the Fine

Interactive Brokers neither admitted nor denied the charges, but consented to the entry of FINRA’s findings and agreed to pay the $3.5 million fine. Interactive Brokers also agreed to review and revise its policies, procedures, and systems to ensure compliance with the rules and prevent future violations.

Interactive Brokers Faces $3.5 Million Fine for Price Violations

FINRA’s Executive Vice President and Head of Enforcement, Jessica Hopper, said, “FINRA rules are designed to protect investors and promote market integrity, and firms that fail to comply with them will be held accountable. Interactive Brokers’ repeated failures to adhere to these rules harmed its customers and undermined the reliability and accuracy of trade reporting data.”

This is not the first time that Interactive Brokers has faced regulatory action for its misconduct. In August 2020, the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and FINRA collectively fined Interactive Brokers $38 million for widespread failures in its anti-money laundering program.

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