Interactive Brokers Fined $650,000 in FINRA Settlement

Interactive Brokers LLC has agreed to pay a $650,000 fine as part of a settlement with the Financial Industry Regulatory Authority (FINRA). The case centers on shortcomings in the firm’s process of approving customers for options trading.

Regulators found that between November 2019 and December 2024, the brokerage failed to conduct reasonable due diligence before granting certain accounts, not managed or advised by financial professionals, the ability to trade options. These accounts, known as Self-Directed Customers, were approved even when there were clear warning signs that options trading might not be appropriate for them. 

The firm relied heavily on an automated system to decide which customers could access options trading. Although technology can streamline processes, FINRA determined that Interactive Brokers’ system was not properly designed. As a result, the system allowed approvals that overlooked red flags. Consequently, the brokerage violated FINRA Rules 3110, 2360, and 2010, which outline supervisory obligations and ethical conduct standards. 

Interactive Brokers Fined $650,000 in FINRA Settlement

Moreover, FINRA discovered another serious lapse during this same period. Interactive Brokers failed to preserve required records showing instances where its automated system disapproved customers for options trading. Recordkeeping is a critical regulatory requirement, and the firm’s inability to maintain these records puts it in further violation of FINRA Rules 2360, 4511, and 2010. 

As enforcement unfolded, regulators emphasized that proper supervisory systems and accurate records are vital to protecting investors, especially in high-risk products such as options. Interactive Brokers, despite its global stature as a major electronic trading firm, fell short of these basic obligations. Although the violations did not necessarily indicate intentional misconduct, they underscored weaknesses in the firm’s compliance framework. Alongside the $650,000 fine, Interactive Brokers has accepted a formal censure. By doing so, the firm signaled its willingness to resolve the matter without contesting FINRA’s findings. 

While the brokerage did not admit nor deny the specific allegations, the settlement marks a reminder that firms operating at scale must balance efficiency with robust oversight. In fact, regulators often view automated systems as tools that require human oversight to ensure compliance. Therefore, the case highlights the need for financial firms to design controls that not only meet operational demands but also fulfill regulatory standards designed to safeguard investors.

Getting to Know the Stock Broker 

• Interactive Brokers offers competitive fees and global trading options. 
• Also, the platform is user-friendly and cost-effective, with competitive spreads. 
• It also provides a straightforward trading experience for diverse needs. 
• Traders and investors can access a wide range of assets. 
• Novices may need time to master its robust tools. 

Also, check out Stock Brokers Reviews for the latest enhancements and take your trading to the next level!