Release Date: 25th January 2018

To access the original FCA document, click here.

Summary

The Financial Conduct Authority (FCA) has fined Interactive Brokers (UK) Limited (IBUK) £1,049,412 for inadequate post-trade systems and controls to identify and report suspicious client transactions during the period from February 2014 to February 2015. IBUK, an online broker based in London, failed to ensure its delegated US-based post-trade monitoring team was effective in capturing potential market abuse, leading to significant oversight failures.

IBUK did not sufficiently contribute to the design and calibration of the monitoring systems or test their operation, which compromised the detection of suspicious activities. Furthermore, IBUK lacked quality assurance and oversight of the US team’s review process and failed to provide adequate training to the staff conducting these reviews. This resulted in a heightened risk of failing to submit suspicious transaction reports (STRs) to the FCA, with three identified instances of unreported suspicious trading by IBUK clients.

Mark Steward, Director of Enforcement and Market Oversight at the FCA, emphasised that firms must ensure their trading systems are not used for financial crime and are responsible for reporting suspicious conduct. The FCA highlighted the serious and systemic weaknesses within IBUK’s procedures, justifying the substantial fine imposed.

Key Takeaways for Other Firms:

• Effective Oversight: Ensure robust oversight of delegated monitoring tasks, including quality assurance and continuous monitoring.
• Adequate Training: Provide comprehensive training for staff involved in the review and reporting of suspicious transactions.
• System Calibration: Actively participate in the design and calibration of post-trade monitoring systems to ensure they effectively capture potential market abuses.
• Regular Testing: Conduct regular tests on the operation of monitoring systems to identify and rectify deficiencies.
• Timely Reporting: Promptly report any suspicious transactions to the relevant authorities to comply with regulatory requirements.

In conclusion, the FCA’s fine on IBUK underscores the importance of maintaining effective and vigilant market abuse controls. Firms must take proactive steps to ensure their monitoring systems are robust, their staff are well-trained, and their oversight processes are rigorous to prevent financial misconduct and comply with regulatory standards.