Is Interactive Brokers Legitimate Firm?
Interactive Brokers, LLC (IB) is a U.S.-based online discount brokerage. It is the largest U.S. online brokerage firm by number of daily average revenue trades. It also is
the leading forex broker. The company is headquartered in Greenwich, CT and has offices in Chicago, Hong, Kong, Shanghai (a representative office), Sydney, and Zug [Switzerland].
It is a subsidiary of Interactive Brokers Group, Inc., which has offices in thirteen countries. In other words, Interactive Brokers is a major player in the online brokerage business.
Founded in 1993, Interactive Brokers has a relatively long history. One reason individual investors might be suspicious of Interactive Brokers is because they aren't a household name like Fidelity or Schwab, and don't advertise nearly as much as most of the other leading online brokers. Another reason could be the fact that Interactive Brokers has an international presence, which may lead some to believe its business practices don't measure up to solely American firms. Finally, Interactive Brokers is geared toward active, professional traders who are more sophisticated than typical individual investors are and want access to all types of securities in worldwide markets, not just U.S. markets.
Is Interactive Brokers Safe?
No company is ever 100% safe. Businesses regularly fail or file for bankruptcy for all sorts of reasons. Interactive Brokers has established itself as a reputable online broker. It is rated "Best Online Broker" by Barrons for four consecutive years. They have regularly won awards from other institutions over the past 10 years.
For U.S. investors, Interactive Brokers is regulated and monitored by the Securities and Exchange Commission (SEC). According to their website, the SEC's mission is "to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation." Their specific role as pertains to investors is to enforce fair trading rules and practices of brokers, which means, " All investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it."
Interactive Brokers is a member of the Financial Industry Regulatory Agency (FINRA, http://www.finra.org/), "an independent, not-for-profit organization authorized by Congress to protect America's investors by making sure the securities industry operates fairly and honestly." This means Interactive Brokers submits to scrutiny of their operations, complies with FINRA's rules, and promotes market transparency and investor education.
Interactive Brokers also offers trading in commodities futures and foreign currency exchange, so it is registered with the Commodities Futures Trading Commission (CFTC)
and the National Futures Association (NFA). They are also registered with the appropriate regulatory agencies in the countries in which they do business.
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Is Interactive Brokers SIPC/FDIC Insured?
The FDIC does not insure equity investments sold by any brokerage, including Interactive Brokers. However, the
Securities Investor Protection Corporation (SIPC, http://www.sipc.org) insures investors for up to $500,000 per account. This means that if Interactive
Brokers were to go bankrupt or fail for some reason, SIPC guarantees each account up to that limit. $250,000 of an investor's cash is protected within that account. SIPC does not
guarantee that any investment will generate a positive return, so investors are always at risk for a company they own stock in to fail and render their investment worthless.
Is Interactive Brokers a Scam?
With all the above information in mind we are 100% confident that Interactive Brokers is not a scam. Also, we have had an account with them since
2002.
According to the website ForexRealm.com, Interactive Brokers is not a scam based on its foreign exchange trading practices. From an apparently comprehensive review of more
than 60 forex brokers, the website did rate as "Scams" twelve other companies.
Interactive Brokers Complaints
We did have issues with company's customer service, position liquidations, and some people even raised concerns about company trading against its own customers. Interactive Brokers
is also charging monthly inactivity and market data fees - so it's definitely not for everyone.
Interactive Brokers BBB Rating
Interactive Brokers' Better Business Bureau (BBB) standing is above average, with a A+ rating. This rating is one of the highest among
large brokerage houses. In the past 3 years, 11 complaints against Interactive Brokers
have been closed with the BBB. Here's the breakdown:
Advertising/Sales Issues - 1
Billing/Collection Issues - 4
Delivery Issues - 0
Problems with Product/Service - 6
Guarantee/Warranty issues - 0
The company has not received any reviews from the BBB. The takeaway from the low number of complaints and no customer reviews is that Interactive
Brokers serves the most sophisticated investors who know precisely what services they will be getting and are less likely to be susceptible
to misinformation, miscommunication, or unscrupulous employees of the company.
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