I support this enforcement action against Interactive Brokers, a Commission-registered broker, as another victory in holding Wall Street institutions accountable for their pervasive use of unauthorized communication methods, like private texts and in some cases Whatsapp, violating the law and evading regulatory oversight requirements.  Together with our previous offline communications enforcement actions, the Commission has levied over $1 billion in penalties against 20 Wall Street institutions and large foreign banks,[1] sending a zero-tolerance message to those who seek to evade regulatory oversight.  This is combined with over $1.5 billion in penalties from the SEC, for a total of more than $2.5 billion in penalties.

These and the previous CFTC cases shut down and bring transparency and public accountability to pervasive and evasive market participant practices that jeopardize market integrity and violate the law.  The CFTC is requiring Interactive Brokers to admit wrongdoing,[2] pay $20 million in penalties for recordkeeping violations of the law (a combined $55 million between CFTC and parallel SEC cases), and to fix internal policies and practices to ensure that both U.S. regulators and the broker’s executives can prevent, detect, and correct unauthorized illegal communications.

1.            The widespread use of unauthorized communications reflects a pervasive culture of evasion at Interactive Brokers.

Based on the serious threat that unauthorized communications platforms pose to market integrity, the CFTC is requiring an admission of wrongdoing as part of this settlement.[3]  Too often, accountability and deterrence is only discussed in terms of the size of a penalty.  In my enforcement experience, deterrence can be achieved from a defendant having to admit wrongdoing, combined with a penalty.  Particularly where defendants have been the subject of multiple enforcement actions without a change in culture, the CFTC must use every tool at its disposal to achieve deterrence.

That is why admissions are especially appropriate in this action.  This is not the first time the Commission has found that Interactive Brokers failed to supervise its business and its employees.  Indeed, this is now the fourth year running that this broker has been before the CFTC.[4]  It is unsurprising that Interactive Brokers’ compliance function failed to catch these previous violations, when employees, including those at senior levels, used unauthorized communication methods to avoid recordkeeping and oversight requirements.  It is especially concerning that some of the supervisory personnel responsible for ensuring compliance were themselves using these unapproved methods. 

Interactive Brokers should not be able to just pay the penalties, fix this one problem, and continue to operate business as usual.  The “tone at the top” of this broker should change immediately to a tone of continued compliance with the law.

2.            A broader message

The CFTC and the SEC have brought actions for unauthorized communications against a broad swathe of the market, including large Wall Street banks, foreign banks, and brokers like Interactive Brokers.  The illegality that the CFTC found in all of these cases was disturbingly widespread, evasive, conducted by senior officials as well as those responsible for compliance, and a clear violation of the law and internal bank policies.  It was well known within these institutions that their internal policies were being flagrantly violated in practice.  But no one stopped it.

This is not the last time that senior staff, including supervisory personnel, at financial institutions will have a choice to make about how to deal with violations of law and policies.  This set of actions should be a wakeup call for financial institutions to reset the tone at the top.  Change can only happen if the C-suite of financial institutions establishes a culture of compliance over evasion.  It is far past time for the C-suite to step up.

[2]  In September 2022, I called for more defendant admissions in CFTC settlements.  See Statement by Commissioner Christy Goldsmith Romero: Proposal for Heightened Enforcement Accountability and Transparency in Settlements (Sept. 19, 2022), available at https://www.cftc.gov/PressRoom/SpeechesTestimony/romerostatement091922.

[3]  In September 2022, I proposed a “Heightened Enforcement Accountability and Transparency” (HEAT) Test for the CFTC to require more defendants to admit wrongdoing in CFTC enforcement settlements where admissions are necessary to promote the public interest goals of law enforcement—justice, accountability, and deterrence—to the fullest extent.  CFTC Commissioner Christy Goldsmith Romero, Proposal for a Heightened Enforcement Accountability and Transparency (“HEAT”) Test to Require More Defendants to Admit to Wrongdoing in Settlements, (Sept. 19, 2022),
https://www.cftc.gov/PressRoom/SpeechesTestimony/romerostatement091922.

[4]  Notably, Interactive Brokers neither admitted nor denied the findings and conclusions in each of the three previous consent orders. In re Interactive Brokers LLC, CFTC No. 22-18, 2022 WL 2734272 (June 30, 2022); In re Interactive Brokers LLC, CFTC No. 21-19, 2021 WL 4501466 (Sept. 28, 2021); In re Interactive Brokers LLC, CFTC No. 20-25, 2020 WL 4734993.