The Financial Industry Regulatory Authority (FINRA) has issued a censure order and penalty of $475,000 on Interactive Brokers (Nasdaq: IBKR) for lapses in its share lending program. The brokerage has already settled with the regulator.
Lapses in Calculations
According to the official “Acceptance, Waiver, and Consent (AWC)” letter, FINRA detailed that Interactive Brokers incorrectly calculated the number of excess shares of stocks listed on European exchanges it had available to return to its customers from whom it had borrowed under the stock lending program.
As a result of the lapse between June and December 2021, the brokerage returned borrowed shares in more than 800 instances when it should not have, resulting in the creation or increase of securities deficits by the firm.
Thus, according to the regulator, the Connecticut-headquartered brokerage giant failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to comply with its possession and control obligations.
An Unregistered Person in Charge
Furthermore, the broker allowed an unregistered associated person to lead and oversee some software development efforts concerning its securities finance business, including its securities lending program between January 2021 and December 2023, the regulator highlighted, adding that such a person must be registered with FINRA.
However, as Interactive Brokers accepted the penalty and other actions by FINRA, the regulator “will not bring any future actions against [the broker] alleging violations based on the same factual findings.”
Interestingly, Interactive Brokers also faced scrutiny from the Australian financial market regulator last year for compliance lapses around its stock lending program there. Under the stock lending program, the broker allows shareholders of some companies to lend their stocks to other traders who would then take short positions on them.
Meanwhile, a recent Bloomberg report revealed that Interactive Brokers is one of the bidders for acquiring Danish brokerage giant Saxo Bank. Other bidders include Altor Equity Partners and Centerbridge Partners.
The Financial Industry Regulatory Authority (FINRA) has issued a censure order and penalty of $475,000 on Interactive Brokers (Nasdaq: IBKR) for lapses in its share lending program. The brokerage has already settled with the regulator.
Lapses in Calculations
According to the official “Acceptance, Waiver, and Consent (AWC)” letter, FINRA detailed that Interactive Brokers incorrectly calculated the number of excess shares of stocks listed on European exchanges it had available to return to its customers from whom it had borrowed under the stock lending program.
As a result of the lapse between June and December 2021, the brokerage returned borrowed shares in more than 800 instances when it should not have, resulting in the creation or increase of securities deficits by the firm.
Thus, according to the regulator, the Connecticut-headquartered brokerage giant failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to comply with its possession and control obligations.
An Unregistered Person in Charge
Furthermore, the broker allowed an unregistered associated person to lead and oversee some software development efforts concerning its securities finance business, including its securities lending program between January 2021 and December 2023, the regulator highlighted, adding that such a person must be registered with FINRA.
However, as Interactive Brokers accepted the penalty and other actions by FINRA, the regulator “will not bring any future actions against [the broker] alleging violations based on the same factual findings.”
Interestingly, Interactive Brokers also faced scrutiny from the Australian financial market regulator last year for compliance lapses around its stock lending program there. Under the stock lending program, the broker allows shareholders of some companies to lend their stocks to other traders who would then take short positions on them.
Meanwhile, a recent Bloomberg report revealed that Interactive Brokers is one of the bidders for acquiring Danish brokerage giant Saxo Bank. Other bidders include Altor Equity Partners and Centerbridge Partners.
This post is originally published on FINANCEMAGNATES.
