ASIC investigation leads to US-based firm refunding $1.5 million to Australian customers

Following an investigation by ASIC, Interactive Brokers, a US-based online brokerage firm, will refund approximately $1.5 million in fees and commission payments to its retail margin lending customers.

6219498045_547d47b249_oThe refunds will be made as part of an enforceable undertaking (EU) accepted by ASIC and follow an ASIC investigation which found that Interactive Brokers did not, during the period July 2010 to August 2013, hold an Australian financial services licence (AFS) licence which authorised the provision of margin loans.

ASIC was also concerned that the firm did not comply with its responsible lending obligations when issuing margin loans by not verifying customers’ financial information. Approximately 3000 retail customers took out a margin loan with Interactive Brokers during this period.

Under the terms of the EU, Interactive Brokers:

  • admits that it contravened the Corporations Act 2001 by not holding an authorisation under its AFS licence that covered the provision of margin loans
  • undertakes to refund approximately $1.5million in fees and commission payments received from approximately 3,022 retail customers who used the firm’s margin lending facilities during the period from 1 July 2010 to 19 August 2013
  • will pay $100,000 to the Financial Rights Legal Centre for the purposes of consumer education concerning financial services and consumer rights in Australia, and
  • has engaged independent consultant PricewaterhouseCoopers to check that the customer refunds have been calculated and paid in accordance with a methodology agreed between Interactive Brokers and ASIC.
  • PricewaterhouseCoopers will be reporting on its verification of the refund process to ASIC and Interactive Brokers.

Commissioner Greg Tanzer said, ‘Margin loans come with unique risks and will not be suitable for all consumers. It is therefore important that they be provided by appropriately licensed or authorised companies. Providers must also comply with their responsible lending obligations when issuing margin loans.’

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