This FAQ is split into three parts.

• Part A sets out key information in relation to the Proposed Transfer (as described below).
• Part B covers key legal and regulatory topics related to the Proposed Transfer (as described below).
• Part C aims to answer any other questions that you may have and provides some further and more practical information in relation to what will and will not be changing following the Proposed Transfer (as described below).

PART A – THE PROPOSED TRANSFER

1.        What is the situation currently and why are things changing?

Interactive Brokers Securities Japan, Inc. (“IBSJ”) was granted authorization by the Kanto Local Finance Bureau to operate as a Japanese securities firm in October 2005. At that time, we attempted to leverage the strength of Interactive Brokers Group (and its ability to provide clients access to global markets) by offering an account structure that would allow clients to access markets worldwide as well as the Japanese market, all through a single domestic account. In the course of establishing this structure, we realized our goal to provide access to overseas markets from a single domestic account would entail a degree of complexity due to differences in settlement in non-JPY currencies and Japanese domestic regulations. Therefore, we implemented an account structure to offer overseas (non-Japanese domesticated) products through IBSJ’s affiliated broker-dealer based in the U.S., Interactive Brokers LLC (“IB LLC”), intermediated by IBSJ, while offering Japanese domestic products through an IBSJ account.

IBSJ is now modifying this approach and will begin providing access to Japanese and Global markets directly, through a single IBSJ account. As a result, IB LLC will no longer support accounts for retail Japanese clients intermediated by IBSJ.

2.     What “changes” will Japanese clients experience?

We propose to transfer the business that you currently conduct with IB LLC to IBSJ. In other words, it is our intention that the accounts, investments and services currently provided to you by IB LLC will instead be provided by IBSJ (for convenience we will refer to this as the “Proposed Transfer”).

3.     When will the Proposed Transfer occur?

The Proposed Transfer is scheduled to commence soon after July 14, 2023. We will alert you once your account is transferred.

4.     Who is IBSJ? What type of firm is it?

IBSJ is a Japanese online securities broker which is regulated by Kanto Local Finance Bureau under the Registration No.187 for its financial business and regulated by Ministry of Economy, Trade and Industry (METI) / Ministry of Agriculture, Forestry and Fisheries (MAFF) for its commodity derivative business.

5.     What are IBSJ’s legal details?

IBSJ is registered as a private company limited by shares and is listed in the Register of Companies maintained by Tokyo legal affairs bureau. Its registered address is Kasumigaseki Building 25F, 2-5 Kasumigaseki 3-Chose, Chiyoda-ku, Tokyo, 100-6025 Japan.    

IBSJ’s website is available at: https://www.interactivebrokers.co.jp/en/home.php

6.     Who will regulate IBSJ and where are their details?

As set out above, Kanto Local Finance Bureau (KLFB) is the competent financial business regulator for IBSJ while Ministry of Economy, Trade and Industry (METI) / Ministry of Agriculture, Forestry and Fisheries (MAFF) are the regulators for IBSJ’s commodity derivative business. IBSJ is also a member of Japan Securities Dealers Association (JSDA) and the Commodity Futures Association of Japan (CFAJ).

The details for the regulator and the self-regulatory organizations above are set out in the links below:

7.     Where does IBSJ fit in the broader Interactive Brokers group?

IBSJ is a wholly-owned subsidiary that sits within the Interactive Brokers Group.

8.     What does the Proposed Transfer mean for me? Will there be any material impacts?

It is very important that you read this FAQs carefully and make sure that you understand what the changes are for you. Initially, IBSJ will have a limited product offering for global markets. However, IBSJ plans to extend its global offering (as further explained in Part C) and will notify you of new products you can trade. 

9.     What do I have to do if I want to continue doing business with Interactive Brokers?

If you would like to continue to do business with Interactive Brokers, we require your signed consent and action.

Specifically, we require you to consent and agree to the Customer Agreement and other Documents available under the Important Information section of the Proposed Transfer process and to the regulatory matters outlined in the Invitation, the Important Information and Consent sections of the Proposed Transfer process.  You can do this by following the instructions in the Invitation.

To be clear, you do not have to agree to the Proposed Transfer. However, if you decide to decline or do nothing, IB LLC will not be able to keep servicing your account after the proposed account transfer period. As part of the process, your account may be restricted, and your account may be forced closed. You have the ability to transfer the positions in your account to either IBSJ or another broker by August 31, 2023. If you wish to decline, please follow the instructions in the Invitation.

In either case, we ask that you read the entirety of this FAQ and the Invitation before deciding to consent to or decline the Proposed Transfer. 

10. What happens next?

If you consent to the transfer, please complete all actions detailed in the Invitation and we will prepare your account for the Proposed Transfer. If you already have an IBSJ account, your assets held in the IB LLC account will be consolidated into the IBSJ account following the Proposed Transfer. Following the Proposed Transfer, IBSJ will write to you with further information about the consolidated structure.

PART B – LEGAL AND REGULATORY CHANGES THAT YOU SHOULD BE AWARE OF

1.     What terms and conditions will govern my relationship with IBSJ following the Proposed Transfer? Are these different to the ones that currently apply?

Trades that you conduct after the Proposed Transfer will be governed by the new Customer Agreement between you and IBSJ.  A copy of the new Customer Agreement is available in the Important Information section of the Proposed Transfer process.  Please see the response to Question A3 above in relation to the timing for the Proposed Transfer.

2.     What conduct of business rules (including best execution) will apply to my relationship with IBSJ?

The U.S. conduct of business rules apply to IB LLC accounts. These rules are based on the regulations and rules set by the U.S. Securities and Exchange Commissions (“SEC”).

The IBSJ account will be subject to Japan conduct of business rules, which include regulations and rules set by Financial Service Agency (“FSA”), Japan Securities Dealers Association (“JSDA”) and the Commodity Futures Association of Japan (“CFAJ”).

3.     How will investments that I custody with IBSJ be held from a legal/regulatory perspective? Are there any material differences that will apply to my agreement with IBSJ compared to those that apply to my existing agreement with IB LLC? 

U.S. law and regulations regarding custody of securities and customer funds apply to your accounts with IB LLC.  These include rules set by the U.S. Securities & Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”). The US custody rules require that any cash and fully-paid securities held by IB LLC on your behalf must be held segregated from the assets of IB LLC.

Going forward, Japan custody rules will apply to your agreement with IBSJ. Similar to the U.S. custody rules, the Japan conduct of business rules are based on the regulations on segregation of customers assets set by Financial Instruments and Exchange Act (further explain below in Question B4).  

4.     How am I protected against loss? Are there any material differences that will apply to my relationship with IBSJ compared to those that apply to my existing relationship with IB LLC?

IBSJ’s compensation scheme is different from the compensation scheme you have access to at IB LLC.

Currently, your eligible assets are protected from loss under the U.S. Securities Investor Protection Corporation at an amount of up to USD 500,000 (subject to a cash sublimit of USD 250,000).

After the Proposed Transfer, in the unlikely event of IBSJ’s failure, a certain amount of money is protected by the Japan Investor Protection Fund. Here is a summary of how the Japanese investor protection mechanism works:

(1) Segregated custody by securities firms

When investors trade financial instruments (stocks or other securities), they entrust their assets such as money and financial instruments to a securities firm. If the securities firm keeps the assets entrusted by the customer separate from the securities firm's own assets, the customer's assets will be returned to the customer even if the securities firm fails.

This practice of keeping assets entrusted by customers separate from the securities firm's own assets is called segregated custody. This concept is central to investor protection, and segregated custody is required of all securities companies under the Financial Instruments and Exchange Law.

(2) Japan Investor Protection Fund

Under this segregated custody system, even if a securities firm files for bankruptcy protection, the assets entrusted by customers will be returned to them in full. However, for instances where the securities firm is unable to smoothly return the full amount for any reason, a compensation system is in place through the Japan Investor Protection Fund, which provides compensation up to 10 million yen per customer.

However, as explained in section (1) above, the Japan Investor Protection Fund regulation serves to prevent such a situation from occurring because the assets entrusted by customers will be returned to them if they are kept in the segregated custody of securities companies.

Please note that the Japan Investor Protection Fund (similar to US rules) does not compensate for losses incurred by clients due to a drop in the market value of securities. 

5.     How do I make a complaint to IBSJ? Are there any material differences that will apply to my agreement with IBSJ compared to those that apply with IB LLC? What if my complaint relates to something that dates to when I was a customer of IB LLC?

The new Customer Agreement sets out how to file a complaint with IBSJ.  The complaints handling procedures are materially similar to those that apply to your existing agreement with IB LLC.  If the substance of your complaint relates to something that occurred prior to the Proposed Transfer, then you should address your complaint to IB LLC.  

6.     After the Proposed Transfer, will I still have access to the US regulators to file a complaint?

In case of a complaint, clients should follow the complaints procedure as referred to in the Customer Agreement. Once your account is transferred to IBSJ, the US regulators will cease to have jurisdiction over any complaints you may have in respect to IB LLC. However, please be aware that Japan has a dispute resolution process in the form of the Financial Instruments Mediation Assistance Center (FINMAC), a non-profit organization, to resolve complaints and disputes between customers and IBSJ regarding covered issues. Please refer to the following link for the details of FINMAC.. https://www.finmac.or.jp/english/

7.     How will my personal data be processed and protected? Are there any material differences that will apply to my agreement with IBSJ compared to those that apply to my existing agreement with IB LLC in this context?

Your data will be processed and protected in accordance with the IBSJ Privacy Policy. which can be found at: https://ndcdyn.interactivebrokers.com/Universal/servlet/Registration_v2.formSampleView?formdb=4102&lang=ja. There will be no material change to how your data is protected now.

 PART C – OTHER PRACTICAL QUESTIONS AND NEXT STEPS

1.     Who should I contact before the Proposed Transfer takes place and after the Proposed Transfer if I have any general questions?

Generally speaking, you should contact IB LLC with any questions that you may have prior to the Proposed Transfer, and you should contact IBSJ with any questions that you may have after the Proposed Transfer takes place.  Regardless of who you contact at Interactive Brokers, we will ensure your query is promptly dealt with and we will make best efforts to expediate any issues related to the account migration.

2.     Will the range of products offered be the same?

The range of products offered by IBSJ will not be the same as what is currently offered at IB LLC. Initially, IBSJ will offer:

·         Fully-paid trading in overseas (non-Japanese domesticated) stocks, ETFs and exchange listed bonds that can be offered in Japan; 

·         Fully-paid trading in overseas derivates including (i) futures, options, and warrants on overseas stocks and equity indexes; and (ii) options on futures on overseas stocks and equity indexes;              and

·         The Japanese domestic listed stocks and derivatives, Japanese stock CFDs, and some Japanese yen-denominated overseas derivatives that IBSJ has historically offered.

All unsupported holdings in your IB LLC account need to be closed out before your account can transfer to IBSJ. If you hold any product other than those stated above, please take the time to close out those positions before the Proposed Transfer to allow for a smooth transfer of your account and to avoid any account restrictions.

IBSJ plans to expand the types of other overseas products that it offers in the coming months. We will update these FAQs with additional details as we do.

3.   What currencies are supported at IBSJ?

IBSJ will support a limited number of deposit currencies. The following four deposit currencies, the "Allowed Deposit Currencies"' are JPY, EUR, USD and GBP.

Clients with multi-currency accounts can make deposits in, and withdraw positive balances held in their account, of any Allowed Deposit currencies.

Multi-currency accounts may hold long currency balances in all available IBKR global currencies, including currencies that are not Allowed Deposit Currencies. Short currency balances are not supported at this time. IBSJ will automatically flatten any short currency balance by converting from a long currency balance available in the account.

For further information, please see IBSJ's Risk Disclosure Statement for IB Multi-Currency Accounts.

4.    What happens if I already have an account at IBSJ?

If you have an existing account with IBSJ, the assets in your IB LLC account will be transferred to your IBSJ account after the Proposed Transfer takes place. If you do not have an IBSJ account, we will create a new one for you.

5.  Will I have access to the same trading platform or be subject to any software changes following the transfer of my account?

The migration will have no impact upon the software you use to trade or administer your account. The technology will remain the same as it is today. 

6.     Will all account balances be transferred at the same time?

All balances, with the exception of accruals (e.g., interest, dividends) will be transferred at the same time.  Once accruals have been posted to cash, they will automatically be swept to the transferred account.  

7.     What will happen to my current account following the transfer of my account to IBSJ? 

Once all accruals have been swept, your current IB LLC account will be closed and inaccessible for trading purposes.  You will still be able to access this closed account via the Client Portal for purposes of viewing and printing archived activity and tax statements.

8.     Will IBSJ’s commissions and fees change when my account is transferred? 

No. IBSJ commissions and fees do not vary from the ones charged by IB LLC for your current account. However, since IBSJ is a Japanese securities broker, Japanese consumption tax will be added to all fees. 

9.     Will my trading permissions change when my account is transferred? 

Your trading permissions will not change when your account is transferred for products that are supported by IBSJ. Trading permissions not supported by IBSJ will not migrate to the IBSJ account.

10. Will open orders (e.g., Good-til-Canceled) be carried over when my account is migrated? 

Open orders will not be carried over to the new account.  You must resubmit any orders when your account is migrated.

11. Will I receive a single, combined annual activity statement at year end? 

You will receive an annual statement for your existing IB LLC account which will cover the period starting 1 January 2023 through the date of transfer and a second annual statement for your new account at IBSJ which will cover the period starting from the migration date through the end of the year ending December 2023. 

12. Will the current cost basis of positions be carried over when my account is migrated? 

Yes, this migration will have no impact upon the cost basis of your positions.

13. Will the migrated account retain the same configuration as the current account? 

The configuration of the account following migration will match that of the current account to the extent permissible by regulation. This includes attributes such as market data, additional users, and alerts. 

14. Will my login credentials change?

No. Your username, password, and any 2-factor authentication process in place for your existing account will remain active following migration. If you have an existing IBSJ account, your account number will not change.  If you do not have an IBSJ account and we create a new one for you, you will receive a new account ID.

1.      What does the Transfer mean for me? What terms and conditions will govern my relationship with IBCE following the Transfer?

Following the Transfer, IBCE will be responsible for ensuring the safe custody of your assets. The IBCE General Business Terms [https://gdcdyn.interactivebrokers.com/Universal/servlet/Registration_v2.formSampleView?formdb=4500] ("GBR") will govern your account and assets while they are held under custody in trust at IBCE in this limited capacity. You will not be able to place trades or make other financial decisions on your account and IBCE will not provide any investment services to you unless you expressly agree to the GBR and sign the Client Agreement and complete any other open steps needed to open an IBCE account. IBCE will send you an email following the Transfer with the steps to take to secure your login credentials to access your account at IBCE.

2.      What do I have to do if I want to continue doing business with Interactive Brokers?

If you want to continue doing business with Interactive Brokers, we require your cooperation and action in order for IBCE to provide you investment services. Specifically, we need you to open a new account with IBCE, expressly agree to the GBR and sign the Client Agreement and any other required documents, and provide any additional documents or information requested.

If you do not want to continue doing business with Interactive Brokers, you may instruct IBCE to transfer your assets to another broker or bank, and IBCE will comply with your instructions subject to applicable laws and IB's standard procedures.

3.      How will my assets be custodied at IBCE?

Until you agree to and accept the GBR and the Client Agreement and open a brokerage account with IBCE, IBCE will provide custody services in limited scope:

·         for any cash balance transferred to IBCE, you will be entitled to the amount of the cash balance in your account base currency on the date it is transferred to IBCE and IBCE will not convert your cash balance to another currency or pay any interest on cash that it holds in custody for you. 

·         for any financial instruments transferred to IBCE, you will be entitled to those financial instruments and IBCE will not provide any investment services in relation to your financial instruments while they are in IBCE’s custody. For example, IBCE will not take any measures to mitigate losses resulting from market movements. However, in the event your account has insufficient margin, IBCE will take appropriate measures and liquidate positions, without issuing a margin call to you, to bring your account in compliance with margin requirements which are subject to change. More information is provided in FAQ 10.

If you open an IBCE account, Hungarian custody rules will fully apply to your relationship with IBCE. Like the Luxembourg custody rules, the Hungarian conduct of business rules are based on the recast Markets in Financial Instruments Directive, the Markets in Financial Regulation and various delegated directives and regulations (collectively, "MiFID").

4.      Am I protected against loss?

The Hungarian Investor Protection Fund according to Act CXX of 2001 on the Capital Market may protect your assets from loss, at an amount up to a maximum of EUR 100,000, should IBCE default and be unable to meet its obligations to you. To be eligible for the Fund, you must have a contractual relationship with IBCE.

The compensation provided by the Fund covers claims arising from contracts entered into within the agreement with IBCE of brokerage activity, securities custody, securities account management and client account management activities performed by IBCE.

Hungary's compensation scheme is similar to the compensation scheme you have access to in Luxembourg. The purpose of the Fund is to pay compensation to you in the event that:

·     the Central Bank of Hungary initiates liquidation proceedings of IBCE, or

·     a court orders the liquidation of IBCE. 

IBCE is a member of the Fund (please see https://bva.hu/en/ipf/ipf-members/). 

If you are eligible, you can only make a claim after a firm goes out of business and its assets have been liquidated and distributed to those who are owed money. Please check the details of the schemes for any limits that apply – not all losses will be covered as there are maximum levels of compensation.   The Fund will pay you compensation for the amount you have lost up to a maximum of EUR 100,000.

The amount paid by the Fund is:

·     100% up to the limit of the EUR equivalent of one million forints (EUR 2,805 on 5^th September 2021),

·     above one million forints: 1 million forints and 90% of the part above one million forints to a maximum of EUR 100,000.

5.      How do I make a complaint to IBCE? What if my complaint relates to something that happened while I was a customer of IBLUX?

The GBR sets out how to lodge a complaint with IBCE. The IBCE complaints handling procedures are materially similar to those that apply to your existing relationship with IBLUX, but the scope of the complaint provisions is much narrower as the services provided to you are limited to holding your assets under custody in trust until you submit transfer instructions or become a full IBCE client.

If the substance of your complaint relates to something that happened prior to the Transfer, then you should address your complaint to IBLUX. 

6.      After the Transfer, will I still have access to the CSSF to file a complaint?

In case of a complaint, investors should follow the complaints procedure as referred to in the IBLUX Customer Agreement. Once the Transfer has taken place, the CSSF will cease to have jurisdiction over any complaints that you may have in respect of IBLUX. However, please be aware that Hungary has a dispute resolution scheme operated by the Central Bank of Hungary in the form of the Financial Arbitration Board ("FAB"). The FAB is a free and independent statutory dispute resolution scheme for financial services. You may be eligible to make a complaint to the FAB if you are a retail customer.  Details of FAB can be found on https://www.mnb.hu/en/hungarian-financial-arbitration-board

 The FAB can be contacted at: 

Postal Address

Financial Arbitration Board

1525 Budapest

Pf. 172

Email

ugyfelszolgalat@mnb.hu

7.      How will my personal data be processed and protected? Are there any material differences that will apply to my relationship with IBCE compared to those that apply to my existing relationship with IBLUX in this context?

Your data will be processed and protected in accordance with the Interactive Brokers Group Privacy Policy which can be found at:https://www.interactivebrokers.com/en/index.php?f=305. There will be no material change.

8.      Will the range of services be the same?

No. This account has been created solely for the safe custody of your assets while we wait for you to instruct us on where to transfer your assets or elect to become a full IBCE client. As a result, our services are limited to holding your assets and where relevant taking action to ensure you meet applicable margin requirements.

9.      Did you liquidate some or all the positions in my account to facilitate the Transfer?

As we previously wrote to you explaining, in many cases we liquidated some or all positions in client accounts back to the account’s base currency to facilitate that Transfer to IBCE. Where positions remain, FAQs 10-11 address how they will be transferred and custodied at IBCE.

10.  I have a margin account. Are the margin terms governing my account different following the Transfer to IBCE?

No. Your obligations and responsibilities in connection with your margin account and trading on margin remain following the Transfer as they were at IBLUX. However, you are not able to freely operate the account, including opening of new positions, unless you become a full IBCE client.

Please review the provisions relating to margin in the IBCE Client Agreement [https://gdcdyn.interactivebrokers.com/Universal/servlet/Registration_v2.formSampleView?formdb=4501], as they will apply to your account and assets while they are held under custody in trust at IBCE.

11.  What happens to any security I have granted to IBLUX as part of a margin loan?

If you have granted security or collateral to IBLUX this will transfer to IBCE upon the Transfer taking place.

12.  Will all account balances be transferred at the same time and what is the timing?

IBCE will support a limited number of deposit currencies.  The following ten cash deposit currencies, the "Allowed Deposit Currencies" are: EUR, USD, GBP, CHF, DKK, NOK, SEK, HUF, CZK and PLN

Where appropriate to facilitate the Transfer, we converted long cash balances in other currencies to one of the Allowed Deposit Currencies before migration.

In accordance with the client asset protection rules in Hungary, client funds must be protected in the same form that they were received by the broker.  This contrasts with your previous broker, IBLUX, whose regulatory client asset rules allowed them to protect your funds in equivalent value in another currency.  Short currency balances are unaffected.  

All cash balances will be transferred at the same time, and your current account at IBLUX will be closed and inaccessible for trading purposes. You will still be able to access this closed account via the Client Portal for purposes of viewing and printing historical statements.

13.  Will IBKR’s commissions and fees change when my account is migrated? 

IBKR commissions and fees do not vary by the broker your account is maintained with.

However, while your assets are held in custody in trust at IBCE until you either transfer your assets to another financial institution or to a new account with IBCE, IBCE will apply a monthly fee to hold your account initially set at Euro 100. The monthly fee can be amended at any time in IBCE’s sole discretion notification to you, which might be by way of email or IBCE’s website.

In addition, IBCE will not pay interest to you but shall charge interest to you at such interest rates and on credit or debit balances as are then set forth on the IBCE website. IBCE will also charge a currency handling fee for cash balances in currencies that have negative interest rates.

Keep in mind, if the cash balance of your account is insufficient to cover these fees, IBCE may liquidate assets in the same manner IBLUX would liquidate assets before the Transfer.

14.  I have other questions about what will and will not be changing following the Transfer? 

If you still have questions, please contact IBKR Client Services.

How do I access pending items in Client Portal?

Follow the below procedure to access pending items in Client Portal:

1. Log in to Client Portal.
2. Click the Notifications (bell) icon in the top right corner. The number on the icon shows you how many total unread notifications you have.
3. A drop-down menu will open showing your Pending Items, Corporate Actions and Messages.
4. Click Pending Items.
5. You can open and view any pending item to see the details of the item. Click the View button for the pending item you want to view.

What documents are acceptable for these tasks?

Acceptable documents for Proof of Identity and Proof of Address action items include the following:

What Investment Portfolio Changes do I need to make?

IBCE will support a limited number of deposit currencies. The following ten cash deposit currencies, the “Allowed Deposit Currencies” are:

• EUR, USD, GBP, CHF, DKK, NOK, SEK, HUF, CZK and PLN

You will be required to nominate a base currency from the Allowed Deposit Currencies and if you hold long cash balances in other currencies, you will be required to convert those balances to one of the Allowed Deposit Currencies before migration.

In accordance with the client asset protection rules in Hungary, client funds must be protected in the same form that they were received by the broker. This contrasts with your previous broker, IBLUX, whose regulatory client asset rules allowed them to protect your funds in equivalent value in another currency.

Short currency balances are unaffected. You may borrow in any currency that the IBKR group offers.

All cash balances, with the exception of accruals (e.g., interest, dividends) will be transferred at the same time. Once accruals have been settled and posted to cash, they will automatically be swept to IBCE. Once all accruals have been swept, your current account at IBLUX will be closed and inaccessible for trading purposes. You will still be able to access this closed account via the Client Portal for purposes of viewing and printing historical statements.

Metals CFDs are offered by IBCE but spot and OTC metals futures are not. You will be requested to trade out of those positions before conversion to an IBCE account.