Key Insights
-
Hong Kong’s SFC fined Interactive Brokers Hong Kong HK$4.2 million for breaches related to mishandling client assets between 2017 and 2020 due to a programming error that failed to renew client authorizations.
-
The firm had previously faced regulatory action, including a HK$4.5 million fine in 2018 for internal control failures and asset freezes in 2024 following suspected market manipulation and unauthorized trades through compromised accounts.
HONG KONG (MarketsXplora) – Hong Kong’s Securities and Futures Commission (SFC) has fined Interactive Brokers Hong Kong Limited (IBHK) HK$4.2 million (USD 537,000) after uncovering regulatory breaches tied to the mishandling of client assets between 2017 and 2020.
According to an SFC statement, IBHK failed to properly renew standing authorities from 7,911 clients, allowing the brokerage to loan their securities listed on the Hong Kong Stock Exchange without valid authorization. The lapse, spanning from December 3, 2017, to October 23, 2020, was attributed to a programming error that prevented the firm from issuing renewal notices.
The SFC found that IBHK’s actions breached the Securities and Futures (Client Securities) Rules (CSR) and the Code of Conduct. However, the regulator noted that the misconduct was not deliberate, no client losses were identified, and IBHK had self-reported the breach while taking remedial measures.
In determining the sanction, the SFC said it considered IBHK’s cooperation during the investigation and its acceptance of the findings.
IBHK, which holds licenses for three types of regulated activities in Hong Kong, was the only international brokerage implicated in the case. The other affected firms primarily cater to the local market.
Latest IBHK fine adds to previous penalties
This is not the first time IBHK has faced regulatory scrutiny in Hong Kong. In 2018, the SFC fined the firm HK$4.5 million for internal control failures related to inadequate safeguards around market order executions and deficient documentation for its electronic trading systems during 2015 and 2016.
More recently, in November 2024, the SFC froze HK$91 million in client assets across four brokerages, including Interactive Brokers’ Hong Kong unit, following investigations into suspected market manipulation and unauthorized trades through compromised accounts. The SFC issued restriction notices to IBHK and three local firms—SBI China Capital Financial Services, Monmonkey Group Securities, and Soochow Securities International Brokerage—prohibiting them from handling or disposing of certain client assets without prior approval.
The unauthorized activities took place between October 24 and November 6, 2024, prompting a joint investigation by the SFC, Hong Kong Police’s Cyber Security and Technology Crime Bureau, and the Commercial Crime Bureau. The SFC did not disclose further details about the ongoing investigation.
Separately, in October 2024, Interactive Brokers faced penalties in the United States when the Financial Industry Regulatory Authority (FINRA) fined the firm USD 475,000. The fine related to deficiencies in its share lending program, where the brokerage miscalculated the number of excess shares listed on European exchanges available for return to customers. Interactive Brokers has since settled the matter.