Mundial Financial Group, LLC has agreed to pay a fine of $100,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

From January 2018 to at least January 2024, Mundial’s indirect owner acted in a principal capacity and as a registered representative of the firm without registering with FINRA as a General Securities Principal or General Securities Representative.

Specifically, he was the firm’s primary source of new business, soliciting the majority of the firm’s customers and managing relationships with those customers. The indirect owner presented himself as working for Mundial, including by use of a firm email address to conduct firm business. The indirect owner also directed aspects of the firm’s securities business, including whether and how to develop or fund new business lines and the selection of the firm’s clearing firm.

He also made or was consulted on major operational personnel decisions, including hiring and establishing the salaries of the firm’s key employees.

Finally, the indirect owner exercised control over the firm’s finances.

During this period, Mundial knew that its indirect owner was not registered with FINRA in any capacity but nonetheless allowed him to actively engage in the management of the firm’s securities business.

Therefore, Mundial violated FINRA Rule 1210, NASD Rules 1021 and 1031, and FINRA Rule 2010.

From September 2019 to the present, Mundial could not form a reasonable belief that it knew the true identities of its new customers and could not develop customer risk profiles because its CIP procedures were not reasonably tailored to its customer base.

Mundial is an introducing broker-dealer that offers its customers self-directed trading through its clearing firm. The firm’s approximately 35 customers consisted of individuals domiciled outside the United States (predominately in China) or entities whose beneficial owners were domiciled outside the United States. Many of the firm’s customers transacted in low-priced securities and some customers had financial connections to the issuers of the securities deposited into their accounts. The customers communicated with Mundial by email or through the firm’s indirect owner or his associates. Most of the firm’s customers never communicated with anyone registered at the firm, and new account applications were submitted electronically.

Nevertheless, Mundial’s CIP procedures did not address how to verify customers’ identities when the customers did not apply in person. The CIP procedures also did not address customer identity verification when the documentation submitted to verify customers’ identities were written in a foreign language that no one at the firm could read.

Certain new account applications that were submitted electronically included discrepancies in customers’ income and liquid net worth and seemingly unrelated customers listed the same physical and email addresses. Despite these discrepancies, Mundial approved the new account applications without further review and without taking additional steps to verify these customers’ true identities. Mundial also failed to consider these discrepancies for the purpose of developing risk profiles for these customers.

Therefore, Mundial violated FINRA Rules 3310(b), 3310(f)(i), and 2010.

From September 2019 to the present, Mundial failed to establish and implement an AML program, including policies and procedures, that could be reasonably expected to detect and cause the reporting of suspicious transactions, including potentially manipulative trading.

While the firm’s written procedures included lists of red flags of suspicious transactions, they did not address how to detect or investigate those red flags. The procedures also failed to identify what alerts or reports the firm would use to identify potential suspicious transactions or how those alerts or reports should be utilized. In practice, the firm relied solely on a manual review of daily trade reports and cashiering reports provided by its clearing firm, which were not reasonably designed to allow the firm to identify patterns of potentially suspicious transactions across accounts or across multiple days, or to identify other potential red flags identified in the firm’s written procedures.

As a result, the firm failed to detect or reasonably investigate red flags of suspicious transactions during the relevant period, including red flags brought directly to its attention by its clearing firm, such as:

• In December 2021, one customer receiving a deposit valued at nearly the entirety of their reported net worth;
• Simultaneous openings of multiple new accounts, all referred to Mundial by the same individual, for the purpose of depositing the same securities, followed by a lack of activity in those accounts; and
• In June 2020, one customer attempting to transfer a million shares of a low- priced security to a third party, approximately two months after the shares were transferred into a Mundial account.

Finally, the firm’s AML program lacked appropriate risk-based policies or procedures to identify and report suspicious transactions of potential insider trading. During the relevant period, the firm was aware of at least four customers who were corporate insiders with issuers of low-priced securities. For two of those customers, the firm was aware of trading restrictions on the customers’ holdings but had no procedures for tracking what those restrictions were or monitoring for whether customers complied with those restrictions, aside from a manual review of daily trade reports.

Although the firm began to maintain a list of insiders in April 2022, it did not implement any policies or procedures to guide firm personnel about how to monitor the transactions of customers on the list.

Therefore, Mundial violated FINRA Rules 3310(a), 3310(f)(ii), and 2010.

On top of the $100,000 fine, Mundial has agreed to a censure and an undertaking.

Mundial Financial Group, LLC has been a FINRA member since 2011. The firm is headquartered in New York, New York, and has one branch and three active registered representatives. The firm offers self-directed trading to retail investors through its clearing firm.