Interactive Brokers (NASDAQ:IBKR) Australia Pty Ltd, the local unit of Interactive Brokers, was penalized AU$832,500 (approximately $538,000) by the Australian Securities & Investments Commission (ASIC) on Wednesday. The penalty was imposed following the company's failure to identify and respond effectively to suspicious trading activities conducted by one of its clients.
The Market Disciplinary Panel (MDP) of ASIC found that Interactive Brokers was negligent in its failure to identify suspicious trading activities. The broker allowed an experienced trader to place orders aimed at increasing the closing price of an ASX-listed company stock, Orthocell Ltd (OCC). The client's trading activities triggered 44 'marking the close' alerts on Interactive Brokers' own surveillance systems between February 10 and October 13, 2021.
Despite being contacted by ASIC on October 14, 2021, regarding the suspicious activities of its client, Interactive Brokers did not lodge a suspicious activity report with the regulator until November 5, 2021. The MDP considered this delay as a lack of sufficient staff with the necessary skills or experience to properly assess the alerts. It was also noted that staff were not adequately supervised to ensure they were doing their job.
In addition to this, the MDP characterized Interactive Brokers' actions as reckless for allowing further suspicious trading even after ASIC raised concerns. It also pointed out that Interactive Brokers did not maintain the necessary organizational and technical resources to comply with the law.
Earlier this year, ASIC issued two stop orders against Interactive Brokers Australia, temporarily preventing it from issuing Stock Yield Enhancement Program (SYEP) Derivatives to retail investors. These orders were issued after ASIC identified deficiencies in the product's target market determination (TMD) and the broker's product disclosure statement (PDS).
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