
SEC Charges Interactive Brokers with Repeatedly Failing to File SARs - kamaraju
https://www.sec.gov/news/press-release/2020-178
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Havoc
Ignoring the obvious wrong doing there is an element of bias at play here:

>microcap securities

If you want to trade non-mainstream stuff at decent rates IB is the main game
in town. Which naturally makes them home for a more eclectic crowd.

You can't go to your local community bank and say you want to buy shares in
the maker of Cyberpunk 2077...on the Warsaw exchange. IB you can.

Different risk profile...and that exposure comes with fkups

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maest
CD Projekt is hardly a microcap, it's in the Stoxx 600.

~~~
Havoc
My point was more that buying stuff on the Warsaw exchange is well into
"eclectic crowd" territory for most westerners.

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dzhiurgis
I haven’t used it as it, but Interactive Brokers is something like 10-100x
cheaper if you need to wire cash from US to your country when compared with
Transferwise and such.

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literallycancer
You mean for currency conversion, or to simply send USD to a foreign account?

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dzhiurgis
Both cost quite a bit. Banks charge for wire + poor fx rate, where TW just for
wire.

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noodlesUK
I don’t know much about Interactive Brokers, but compare this fine with the
measly fine (13k) issued to Smithfield for workplace safety violations which
lead to thousands of cases of covid and 4 employee deaths. Why are the fines
for financial noncompliance like this orders of magnitude higher than fines
for killing people?

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_jal
Isn't that a bit of a self-answering question?

"We" value capital more than workers. The law reflects that.

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perl4ever
In general, financial compliance laws and regulations ensure that workers get
paid and everything works. They're not limited to, like, online brokers.

Lowering the fines would not improve safety.

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_jal
> Lowering the fines would not improve safety.

If someone made that claim, it wasn't me. It is not clear to me what your
argument is or whom you're arguing with.

Is the claim that financial fraud or KYC laws are designed with worker
protection in mind? That's funny, but I expect you're just making a specific
form of "laws support predictable outcomes..." as a hook.

~~~
perl4ever
For the sake of argument, I think that in order to compare the dollar amounts
and assume that's the "worth" of the infraction, then perhaps it is assuming
how much deterrence there is per dollar.

Is it plausible that abstract financial violations cost more to deter, because
people don't have instinctive aversion to them?

I don't see what the relative amount has to do with anything. The fines for
worker safety should maybe be higher, but there's no particular relationship
to financial regulations. If you think that "real people weren't hurt" by
financial violations, then does that mean the penalty should be zero?

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cryptica
It's good to see the SEC doing its job. It's not enough but it's progress.
Ultimately, we need to bring back accountability by abolishing corporate
personhood.

If corporations were treated the same as people, most of them would be
incarcerated for life or on death row by now. The current approach of fining
them gives them unlimited chances to illegally exploit the system.

If I profited from doing something illegal, I would be jailed as an
accomplice. If a corporation does it, the executives can simply claim that
they didn't know. This is fundamentally unfair.

The result is that nobody is responsible for any of the millions of bad things
which happen in the world. Those who implement or are aware of the wrongdoings
(the employees) don't have the power to change anything. This lack of
responsibility is especially dangerous in our technology-driven age.

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arrosenberg
You can't get rid of corporate personhood. In the absence of that concept, one
would have to sue each shareholder or executive of a corporation individually
in order to bring any kind of liability suit. Allowing a corporation to be
recognized as a single, fictional entity is a useful tool.

A better solution is making executives criminally liable for the actions of
the company, the same way HIPAA holds executives and directors of covered
entities personally liable for breaches.

~~~
cryptica
>> In the absence of that concept, one would have to sue each shareholder or
executive of a corporation individually in order to bring any kind of
liability suit.

I don't see the problem with that. Imagine how much money a victim could earn
from suing every person who participated in the wrongdoing. That would be
totally fair IMO... Probably corporations wouldn't exist anymore (they would
be sued out of existence), but that would be OK. The economy was working
perfectly fine before corporations became commonplace.

They are an unjust and unnatural construct IMO. It doesn't make sense to give
an immortal fictitious entity the same rights as real mortal people.

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arrosenberg
> I don't see the problem with that. Imagine how much money a victim could
> earn from suing every person who participated in the wrongdoing.

Unless your hypothetical victim is independently wealthy, how are they going
to afford the costs of litigation with dozens or hundreds of defendants? Seems
like they'd need some sort of group, organized by a legal structure to fund
such a venture...

> They are an unjust and unnatural construct IMO. It doesn't make sense to
> give an immortal fictitious entity the same rights as real mortal people.

Is this an ideological statement? In the US we have freedom of association, so
I don't understand how they are "unjust". They are a natural result of the
human desire for collaboration and growth, so I'm not sure I get that argument
either. I don't think corporate entities should be allowed to participate in
the political process, but it's a bit silly to say they shouldn't have the
right to participate in the legal process.

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sschueller
I wonder what fines Robin Hood will need to pay for accedently allowing highly
leveraged trades.

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jeffbee
Is there is some objective way that the SEC or FINRA detected activity that IB
failed to report? If so does there exist an opportunity for software or
systems that automate this for market participants? Suspicious Activity as a
Service (SAaaS)?

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james412
This is in the process of being implemented:
[https://www.sec.gov/news/pressrelease/2016-240.html](https://www.sec.gov/news/pressrelease/2016-240.html)

better article: [https://www.refinitiv.com/perspectives/future-of-
investing-t...](https://www.refinitiv.com/perspectives/future-of-investing-
trading/the-consolidated-audit-trail-cat-unpacking-challenges-and-solutions/)

I can't even begin to wrap my head around the infrastructure you'd need to
handle this much daily traffic, considering it'll almost definitely be stored
longer term, never mind how you'd go about querying it in any sensible manner.
It's something upwards of 100 million trades per day

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natcombs
> Firm Will Pay a Total of $38 Million in Penalties to Settle With Regulators

$38 million!?!? That's a expensive mistake for not submitting some paperwork
that should be automated.

I'd like to see a list of international government agencies and what they
can/do charge for penalty fines. I suspect that the United States SEC sets a
high bar compared to some of the smaller fines I've seen elsewhere. GDPR
appears to be one of the top contenders

[https://www.tessian.com/blog/biggest-gdpr-
fines-2020/](https://www.tessian.com/blog/biggest-gdpr-fines-2020/)

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JumpCrisscross
> _paperwork that should be automated_

It’s very difficult to automate SARs. In part due to them requiring a
compliance officer personally signing off on their validity.

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bostik
At least you should have in-house automation flagging potential SAR cases.
Then have compliance staff review those and escalate the valid ones.

 _We_ have a setup like that in place, and we're a gambling operation. A
broker-dealer handling far larger sums of money really has no excuse.

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tmaly
This is dated August 10, 2020.

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xxpor
Sigh, FINRA isn't an agency. It's a private company.

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dmurray
I'm not sure who you're replying to, but it's a "self-regulatory
organisation". In practice it has very similar powers to the SEC and brokers
take it equally seriously: it can fine you or wind down your business. It's
not the Better Business Bureau.

You might think, oh, FINRA is just a private company, I'll just ignore them
and laugh off their attempt to sanction me. This doesn't go any better than if
you do the same with the SEC. If you decide to fight a FINRA enforcement
action, it gets appealed first to the SEC and then if you keep appealing it,
to the courts. Exactly the same process as if you were to fight one from the
SEC.

FINRA is owned and run by its members so you might think it would be
favourable to the brokerage industry. Which it probably is, a bit, but it
doesn't seem to get accused of regulatory capture any more frequently or any
more fairly than the SEC.

