UK regulator fines Interactive Brokers UK $1.5 million over failure in IBUK’s post-trade systems and controls for identifying and reporting suspicious transactions.
25 January, AtoZForex – The primary financial regulator of the UK, the Financial Conduct Authority (FCA), has published a note today that it has fined one of the CFD brokers, Interactive Brokers (UK) £1,049,412.
UK regulator fines Interactive Brokers UK $1.5 million
The UK watchdog has stated that the reason behind the financial penalty is a failure in IBUK’s post-trade systems and controls for identifying and reporting suspicious transactions in the period February 2014 to February 2015.
IBUK is a brokerage that is operating online and executing transactions in particular financial instruments, such as CFDs. The brokerage works directly with UK clients and executes other products on behalf of other companies in the Interactive Brokers Group.
Reportedly, IBUK has delegated the monitoring of its post-trade systems to another company from Interactive Brokers Group in the US. Yet, according to FCA, IBUK has failed to properly input into design and calibration of the post-monitoring systems to make sure that potential market abuse by its client would be captured.
The FCA adds that IBUK has failed to provide effective monitoring of the US team’s conduct of the review of the reports that have been produced. Specifically, the firm did not carry out any quality insurance or oversight of the reports. Additionally, IBUK did not ensure that the staff conducting the reviews is adequately trained.
IBUK's trading systems not meeting FCA standards
According to the Director of Enforcement and Market Oversight at the FCA, Mark Steward:
“Firms not only have a key responsibility to report suspicious conduct in our capital markets, they also have an obligation to ensure their trading systems are not used for the purpose of financial crime. IBUK’s systems were inadequate and ineffective in the face of potentially suspicious transactions; they fell below the appropriate standards and exposed counterparties and the market to risks they did not bargain for. The FCA will continue to enforce appropriate standards of market conduct to ensure our markets function well.”
The FCA further states that companies not only have the responsibility to report suspicious conduct in the capital markets but also to ensure that their trading systems are not utilized for financial crime.
The regulator believes that IBUK’s systems were not appropriate in the face of potentially suspicious transactions. The FCA concluded that the violation by IBUK has revealed serious weaknesses within brokerage’s practices.
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