The US Securities and Exchange Commission (SEC) announced that it imposed an $11.5 million monetary penalty on Interactive Brokers LLC for repeatedly failing to file Suspicious Activity Reports (SARs) for U.S. microcap securities trades it executed on behalf of its customers. The Financial Industry Regulatory Authority (FINRA) and the Commodity Futures Trading Commission (CFTC) filed parallel actions against the firm in anti-money laundering violations and Interactive Brokers agreed to pay penalties of $15 million and $11.5 million, respectively, for a total of $38 million in penalties paid to the three agencies.
According to the order SEC filed, for a period of one year, Interactive Brokers failed to file over 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.
The agency also found that the registered broker-dealer failed to recognize red flags concerning these transactions, failed to properly investigate suspicious activity as required by its written supervisory procedures, and failed to file SARs in a timely fashion even when suspicious transactions were flagged by compliance personnel.
Marc P. Berger, Director of the SEC’s New York Regional Office said:
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. Today’s multi-agency settlement reflects the seriousness we place on broker-dealers complying with their SAR reporting obligations and maintaining appropriate anti-money laundering controls.