According to FINRA, Interactive Brokers LLC was censured and fined $400,000 for failing to accurately report customer complaints to FINRA and for other disclosure failures.

The Greenwich, Connecticut firm did not establish and maintain adequate systems to comply with FINRA Rule 4530(d), which requires member firms to report statistical and summary information about written customer complaints. The firm's procedures provided inadequate guidance to client service representatives on identifying and reporting complaints, referenced incorrect FINRA rules, and training materials used too narrow a definition of reportable grievances.

Due to human error, the firm also failed to report findings by regulatory bodies that it had violated securities laws and regulations, and failed to report an action involving a customer claim settlement exceeding $25,000. The firm additionally failed to promptly file copies of civil complaints and arbitration claims as required.

The firm later self-reported these failures to FINRA and subsequently made the required filings.

Interactive Brokers also failed to amend its Form BD to disclose actions by foreign financial regulatory authorities finding violations by the firm's foreign control affiliates. The firm self-reported this failure and ultimately filed an amended Form BD.

Customer complaint reporting serves important regulatory functions. It helps FINRA identify patterns of potential misconduct, both at individual firms and industry-wide. When firms under-report complaints, it can delay regulatory intervention and potentially allow problematic practices to continue.

For investors, this case is a reminder that FINRA maintains comprehensive databases of customer complaints and regulatory actions. Before selecting a broker-dealer, investors should review the firm's history on FINRA BrokerCheck, which includes information about regulatory events and customer disputes.