Interactive Brokers, along with three local firms, has been implicated in a Hong Kong regulatory action involving suspected market manipulation and account hacking. The Securities and Futures Commission (SFC) has frozen HK$91 million in assets across the four brokerages, citing unauthorized trading activity that occurred between October 24 and November 6.
The SFC issued restriction notices to Interactive Brokers Hong Kong Limited, SBI China Capital Financial Services, Monmonkey Group Securities, and Soochow Securities International Brokerage. These notices prevent the firms from handling, disposing of, or dealing with specific client assets without prior approval from the regulator. The affected brokers must also notify the SFC if they receive any related instructions.
Suspected Market Manipulation and Cybersecurity Breach
The SFC’s action stems from concerns over potential cybersecurity failures at trading platforms. Unauthorized trades made through compromised accounts triggered the investigation. The regulator is collaborating with Hong Kong Police’s Cyber Security and Technology Crime Bureau and Commercial Crime Bureau to uncover the full extent of the suspected hacking incidents.
Interactive Brokers, the only international firm among the implicated brokers, faces heightened scrutiny due to its global presence. This is not the company’s first encounter with Hong Kong regulators. In 2018, the SFC fined the firm HK$4.5 million for internal control failures that led to market disruptions caused by improperly executed trades.
Recent Regulatory Challenges for Interactive Brokers
The asset freeze follows another recent penalty for Interactive Brokers. Last month, the Financial Industry Regulatory Authority (FINRA) fined the firm $475,000 for deficiencies in its stock lending program. FINRA cited errors in the broker’s calculation of excess shares available for lending on European exchanges, which impacted customer returns. The firm settled the matter with the U.S. regulator.
Ongoing Investigation
While the SFC has not disclosed full details of the current case, it raises concerns about the cybersecurity protocols of major brokers, especially those with international operations. Interactive Brokers holds licenses for several regulated activities in Hong Kong and is under increased pressure to address regulatory compliance and internal control measures.
The investigation remains ongoing, with regulators seeking to prevent further misuse of trading accounts and ensure the protection of client assets. This latest development highlights the critical importance of robust cybersecurity and operational safeguards in the financial services industry.
