FCA fines UK arm of Interactive Brokers for poor controls

The UK’s financial watchdog has fined the UK arm of Interactive Brokers, a US retail broker, more than £1m for patchy market abuse controls and failing to report suspicious transactions.

The Financial Conduct Authority levied the fine on Interactive Brokers UK for “serious and systemic weaknesses within its procedures” between February 2014 and February 2015.

IBUK organises and executes deals in futures and contracts for difference for both retail and institutional investors.

The regulator said the UK broker had outsourced surveillance of trades on its venue to a US subsidiary, which failed to properly design, test and implement adequate systems to monitor for potential market abuse.

It also failed to provide “effective oversight” of how the US team then reviewed the reports, and failed to ensure the team were sufficiently trained. That resulted in three occasions in which Interactive UK failed to report suspicious trades around the time material information was disclosed to the market, the FCA said.

“All of these occasions of crystallised risk related to possible insider dealing in one particular type of instrument: contracts for difference,” the regulator said.

Mark Steward, director of enforcement and market oversight at the FCA, said it meant Interactive “exposed counterparties and the market to risks they did not bargain for.”

Interactive Brokers could not be immediately reached for comment.