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The Securities and Exchange Commission (SEC) recently made an announcement regarding Interactive Brokers LLC, stating that the firm will pay a penalty of $11.5 million to resolve charges of repeatedly failing to submit Suspicious Activity Reports (SARs) for trades involving U.S. microcap securities executed on behalf of its customers. Additionally, the Financial Industry Regulatory Authority (FINRA) and the Commodity Futures Trading Commission (CFTC) also reached settlements with Interactive Brokers in relation to anti-money laundering deficiencies, resulting in penalties of $15 million and $11.5 million, respectively. The cumulative penalties paid to these three agencies amount to a substantial $38 million.

Under The Securities and Exchange Commission (SEC) recently announced that Interactive Brokers LLC has agreed to pay a penalty of $11.5 million to settle charges related to its repeated failure to file Suspicious Activity Reports (SARs) for U.S. microcap securities trades conducted on behalf of its customers. Furthermore, Interactive Brokers also reached settlements with FINRA and CFTC for anti-money laundering failures, resulting in penalties of $15 million and $11.5 million, respectively. In total, the firm has incurred a significant $38 million in penalties across the three agencies.

Broker-dealers are obligated to submit Suspicious Activity Reports for transactions suspected of involving fraudulent or unlawful practices. According to the SEC’s order, over a span of one year, Interactive Brokers failed to file more than 150 SARs, disregarding potential instances of market manipulation in its customers’ accounts involving microcap securities. The order reveals that the firm neglected to recognize red flags associated with these transactions, failed to investigate suspicious activities as mandated by its supervisory procedures, and did not file SARs promptly, even when alerted by compliance to suspicious transactions.

SARs play a vital role in assisting regulators and law enforcement agencies in identifying potential violations of securities laws. This settlement with Interactive Brokers underscores the severity of non-compliance in such matters.

The firm in question violated federal securities laws and a related SEC rule concerning financial recordkeeping and reporting obligations. As part of the settlement, the firm has agreed to be censured, cease and desist from further violations. In addition to paying the penalties to these agencies, Interactive Brokers has also committed to retaining an independent compliance consultant and disgorging certain profits as part of its settlements with FINRA and the CFTC.

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Author Bio

Leila Shaver is the Founder of My RIA Lawyer, a law firm that provides compliance and legal consulting for financial institutions. With extensive experience as a securities attorney and compliance expert, she has served as Chief Compliance Officer and General Counsel to RIAs, BDs, and TAMPs with billions in assets under management.

Leila understands the challenges RIAs face and is committed to helping RIAs streamline their processes, mitigate risks, and ensure compliance with regulatory requirements. She received her Juris Doctor from Atlanta’s John Marshall Law School and is a West Georgia Young Lawyers’ Association member. Leila has received numerous accolades for her work, including the Carroll County Bar Association’s Outstanding Young Lawyer Award in 2017.

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