Interactive Brokers Group has "clipped its clients wings" when it comes to investing in certain Chinese companies.  In response to recent worries about accounting irregularities at China-based firms, the Greenwich, CT-based electronic brokerage firm is barring its clients from using borrowed money to buy the shares of more than 130 companies. 

In recent months, dozens of Chinese companies have acknowledged problems with their accounting. The SEC has said it is investigating accounting and disclosure issues at Chinese companies that list on U.S. exchanges through "reverse mergers," arrangements that can avoid the regulatory scrutiny that comes with an IPO. Stocks of some of these firms have tumbled this year.

Interactive Brokers's move, phasing in this week, bars investors from buying stocks on the list on "margin," or with money borrowed from the brokerage.  The firm lists 159 securities from 132 companies.  About 90 stocks are U.S.-traded; the rest trade on exchanges in Germany, Canada or other countries.  This isn't the first time Interactive Brokers has made such a move.  In April, the firm put dozens of other reverse-merger Chinese stocks on its no-margin list.

Interactive Brokers tends to attract active traders.  Last week, the firm reported daily average revenue trades, or DARTs, of 420,000 for May, a figure roughly on par with those posted for April by TD Ameritrade and Charles Schwab, even though Interactive has a customer base of only 173,000, compared with accounts in the millions at its rivals.   [WSJournal, 6/8/11]