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Interactive Brokers Group Lose Arbitration Ruling

Wednesday, May, 13, 2015


Interactive Brokers Group (IBG), an online trading firm, has lost its arbitration over investment decisions made by a trustee in control over an estate fund. The firm has been ordered to pay the beneficiaries of the estate $1.2 by the Financial Industry Regulatory Authority Inc. (FINRA).

 

However, in a rare move, one of the arbitrators on the panel reviewing the case issued a dissenting opinion, claiming that the other arbitrators made their decision based on “emotion” rather than the text of the law. Dissenting opinions in FINRA arbitrations are extremely rare, occurring in only 4% of all cases brought before the organization.

 

The beneficiaries claimed that IBG allowed the trustee to make highly speculative and risky trades using estate funds. While the plaintiffs in the case acknowledge that IBG could not specifically stop the trustee, they allege it made no effort to warn the trustee of the risks or make other efforts to protect the interests of the trust owners. IBG argued that it does not offer trading advice or guidance and only acts as a facilitator.

 

The dissenting arbitrator issued a statement claiming that the trustee’s bankruptcy declaration in another state, which would prevent the plaintiffs from recouping their losses directly, swayed the other panelists to rule in favor of them so they would receive a settlement. Typically, the other arbitrators did not offer any statements concerning their reasoning for the award decision. Based on these comments, IBG announced it was preparing an appeal of the ruling