Statement From Ib General Counsel Regarding Nfa Case

Discussion in 'Retail Brokers' started by DMB, Jun 13, 2006.

  1. DMB



    This is to respond to the erroneous reports, apparently disseminated by one of our competitors, that the National Futures Association (NFA) has filed an action against Interactive Brokers that somehow calls into question the soundness of the firm. This is nonsense. Here are the facts:

    1. NFA has been conducting an inquiry regarding a former Interactive Brokers customer called Kevin Steele. Mr. Steele opened an ordinary individual IB account and, without IB’s knowledge, used it to operate an unregistered commodity pool. Mr. Steele lost several million dollars and his customers in turn complained to the NFA. Mr. Steele made numerous misrepresentations to IB about his account. Mr. Steele also misled his investors about trading losses that his commodity pool was suffering.

    2. The Commodity Futures Trading Commission sued Mr. Steele in May of 2005. In its Complaint against Steele, the CFTC said that Steele “made false statements to the Futures Commission Merchant [Interactive Brokers] that maintained his commodity trading accounts in an effort to lull the FCM’s suspicions…” Based on an inquiry from one of Mr. Steele’s investors, IB did become suspicious and was the first to notify the CFTC of Mr. Steele’s unlawful activities.

    3. IB had no knowledge of Mr. Steele’s activities prior to the inquiry from one of his investors. IB had no relationship with Mr. Steele. He was not in the IB financial advisor program. He was simply one of many thousands of IB individual account holders. IB has fully cooperated with the CFTC and with the NFA in its inquiry.

    4. On June 2, 2006, NFA filed a complaint against Interactive Brokers. The complaint alleges that IB violated an NFA rule that prevents a futures commission merchant (FCM) from doing business with an unregistered commodity pool operator. The complaint also alleges several violations of NFA books and records rules arising from a routine NFA audit.

    5. IB has cooperated fully with the NFA on this matter and expects to reach an appropriate resolution of this matter pursuant to NFA procedures. The NFA Complaint does not in any way call into question IB’s financial integrity or soundness. IB is and will continue to be a member in good standing of NFA (IB’s General Counsel is a member of NFA’s FCM Advisory Committee and the Futures Industry Association Law and Compliance Committee). The IB Group of companies has over $2.4 billion in capital and an Investment Grade rating from Standard and Poor’s.

    6. In today’s strict regulatory environment, brokerage firms routinely deal with many regulatory inquiries, on topics like Reg SHO, Day Trading rules, etc.

    Firms, such as IB who bring new technology and methods of doing business must observe rules created nearly a century ago that may no longer be meaningful and that sometimes cause difficulties. Our goal is to operate in accordance with regulations while at the same time offering our customers state-of-the-art trading systems at extremely low cost. We will always keep our customers informed of how we are doing.

    David M. Battan
    Vice President and General Counsel
    Interactive Brokers LLC
  2. You sure his last name was not spelled Steal :D jeez poor clients of his :(