FINRA Orders Interactive Brokers LLC to Pay Hedge Fund $667,000

Alleged wrongful auto-liquidation made accounts subject to additional margin calls, which continued a death spiral of financial loss.

The turmoil in the market over the last two weeks has likely had significant impact on investors. For investors trading with margin accounts through Interactive Brokers LLC, this could mean even greater financial loss due to the firm’s practice of automatic liquidation.

When trading on margin, an investor borrows funds from the brokerage firm with the agreement that a “maintenance margin,” or minimum account balance must be maintained. If the account value is at risk of falling below the maintenance margin, the firm can require investors to either deposit more funds or make a margin call where the broker exercises their right to sell the stock, or liquidate, to pay down the loan.

In the case of Interactive Brokers, claims have been made by investors that allege the firm’s software automatically liquidated securities, but did not give investors fair pricing for the securities, also known as the “National Best Bid/Best Offer,” as generally required by securities regulations. By not offering fair prices for the stocks, the accounts were subject to additional margin calls, which continued a death spiral of financial loss.

In one recent case, a FINRA arbitration panel found the discount brokerage firm liable for wrongful auto-liquidation and ordered Interactive Brokers to pay $667,000 to a hedge fund that had incurred significant losses due to the allegedly flawed system, according to the FINRA ruling.

If you have suffered financial loss as the result of a wrongful liquidation or margin call with Interactive Brokers LLC or any other brokerage firm, you may be entitled to some measures of recovery and Silver Law Group’s experienced securities fraud attorneys will work to try and help you get back what you have lost through securities arbitration.

When you first consult with Silver Law Group, you can expect a complimentary consultation with a skilled securities arbitration attorney who can help you navigate the sometimes-overwhelming landscape of securities arbitration. Every case at Silver Law Group is handled on a contingent-fee basis, in which you do not pay legal fees unless we win your case. Take the first step toward loss recovery and contact Silver Law Group today.