NEW YORK - Interactive Brokers Group Inc earlier this week banned clients from borrowing money to buy any of 160 Chinese securities because of accounting scandals in China, the company's CEO said, adding that the move could prompt the nation to toughen accounting standards.

"This select group has had an increase in volatility," Interactive Brokers' founder and Chief Executive Thomas Peterffy told Reuters on the sidelines of a Sandler O'Neill & Partners conference on Thursday.

"The Chinese would have to bring their accounting standards up to date," he said when asked about the fallout from his company's decision, particularly if the trend spreads as some expect.

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The small Connecticut-based broker-dealer caused a big stir this week when it announced it would no longer let customers borrow money to take leveraged positions in some Chinese securities. Interactive Brokers began enforcing the ban on Monday and phased it in over the course of the week.

China's rapidly growing economy has sparked intense investor interest in Chinese companies, which in turn has led to a surge in public offerings by these companies in foreign markets such as the United States.

Peterffy, an outspoken pioneer of computer-based options trading in the United States, acknowledged that some investors did not like the ban but said his company was trying to protect clients by protecting itself from possible credit losses.

"There are some complaints, but not too many," he said. "By protecting the firm we protect the clients because, if the firm were to have large credit losses, then obviously the clients would be in jeopardy."

Chinese stocks listed in the US took a beating on Wednesday as brokers raised red flags about trading risks following a series of accounting scandals in the sector.

TD Ameritrade Holding Corp, which runs the largest US retail-trading platform, said it closely monitors US-listed shares of Chinese companies.

"We never allowed them to be margined in the first place," TD Ameritrade CEO Fred Tomczyk said in an interview on the sidelines of the conference.

"If you have advisers that are recommending Chinese stocks, I think you'd better be careful," he said.

Many of the biggest losers on US exchanges on Wednesday were Chinese companies included on Interactive's list.

The heightened concern among investors comes in part after allegations leveled against Sino-Forest Corp. A report last week from researcher Muddy Waters, which had a short position in the stock, last week accused the Chinese forest-plantation company of fraud.

Reuters