The Financial Industry Regulatory Authority (FINRA) has reached a settlement with Interactive Brokers, a company that has been a member since 1995 and has been accused by FINRA of violating rules related to free riding on customer cash accounts. The company accepted the Acceptance, Waiver, and Consent Letter (AWC) as part of the settlement, neither acknowledging nor denying the investigation results.

From October 2015 to December 2022, Interactive Brokers failed to identify over 4.2 million instances of "free riding" behavior in options and issued options trading. 'Free riding' refers to buying and selling securities without full payment, which violates the Federal Reserve Board's Regulation T and FINRA Rules 4210 and 2010.

FINRA has determined that the company's automatic monitoring system did not detect any free riding behavior in options. Therefore, no necessary freezing has been implemented on accounts involved in such activities.

The investigation also highlighted the deficiencies in the company's regulatory system and written regulatory procedures (WSP). FINRA stated that these systems lack compliance and regulations to prevent free riding.

Interactive Brokers agrees to accept condemnation and pay a fine of $2.25 million. Subsequently, the company has updated its monitoring system and WSP to address the identified deficiencies.