Interactive Broker's stock lending service will see a suspension for several weeks by ASIC due to the inappropriate figure from Stock Yield Enhancement Program (SYEP) Derivatives to retail investors.
Australian Securities and Exchange Commission (ASIC) has determined suspension against Interactive Brokers Australia Pty Ltd stock lending facility, which will be in effect for 21 days. What came to be the regulator's concern was the product's target market determination and disclosure statements.
The regulator has issued two interim stop orders prohibiting the broker from issuing Stock Yield Enhancement Program (SYEP) Derivatives to retail investors and product disclosure statements (PDS) due to the inappropriate figure from both.
SYEP Derivatives facilitates Interactive Brokers to borrow securities eligible for retail investors where subsequently such securities are extended to short sellers. In exchange, the original proprietors will receive interest from the broker, who also provides cash collateral to secure the investors' return obligation.
"ASIC made the interim orders to protect retail investors from acquiring SYEP Derivatives where they may not be suitable for their financial objectives, situation or needs," the regulator explained.
Interactive Brokers reportedly violated the TMD requirements of the SYEP Derivatives by, among other things, improperly defining the target market inventors. Regarding Interactive Brokers, the Australian regulator warned that SYEP Derivatives could be exposed to securities lending and counterparty risks.
The authority also raised issues with Interactive Brokers' PDS, stating that it lacked essential details such as fees, commissions, and benefits. Further, there was a false statement about voting privileges being forfeited in the PDS.
"ASIC expects Interactive Brokers to consider the concerns raised regarding the TMD and PDS and take immediate steps to ensure compliance. ASIC will consider making a final order if the concerns are not addressed promptly. Interactive Brokers will have an opportunity to make submissions before a decision is made about any final stop orders," the market regulator stated.