MM Global Securities, Inc. has agreed to pay a fine of $450,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

From at least January 2019 to June 2020, MM Global failed to establish and implement an anti-money laundering (AML) compliance program reasonably designed to detect and cause the reporting of suspicious activity in violation of FINRA Rules 3310(a) and 2010.

The firm lacked reasonable written AML procedures for the surveillance of trading for suspicious activity. The procedures stated that the firm would “mak[e] every effort to detect any efforts to manipulate the market.”

However, the procedures did not identify any types of manipulative trading, such as wash trades, matched orders, spoofing, or layering, and the procedures did not describe how the firm would detect manipulative trading.

Additionally, the procedures stated that the firm would create parameters, including for trade review and wire transfers, to determine “whether a transaction lacks financial sense or is suspicious because it is an unusual strategy for that customer.” However, the firm never created any such parameters and the procedures did not describe how any parameters should be set.

Although the firm’s AML procedures also required the use and review of exception reports to detect unusual transactions, the procedures did not identify any specific exception reports, did not describe how supervisors should use any reports, or what activity should trigger further action by supervisors or the firm.

Also, from January 2019 until October 2019, the firm did not use any exception reports or automated tools to detect suspicious activity, such as cancelled orders, patterns of trading across accounts or multiple days, coordinated trading, trading resulting in losses that might indicate a lack of rational economic motive, and other indicia of common forms of market manipulation. Instead, the firm relied almost exclusively on a manual review of the daily trade blotter to identify suspicious trading, which was not reasonable given the volume and complexity of trading by the firm’s customers.

Moreover, the blotter did not reflect patterns of trading across accounts or across multiple days, which made manual review of the blotter an unreasonable way to identify suspicious activity. In practice, the firm limited its review of the trade blotter to a determination of whether transactions involving a significant number of shares were consistent with customers’ trading histories. This review excluded transactions involving fewer shares, which comprised a significant portion of MM Global’s business, and did not surveil for wash trades, matched orders, spoofing, or layering.

From at least October 2017 to April 2019, MM Global also failed to implement its Customer Identification Program (CIP) in violation of FINRA Rules 3310(b) and 2010.

In addition, from November 2018 to August 2019, MM Global failed to preserve and maintain certain instant messages and email communications of its registered representatives in violation of Section 17(a) of the Securities Exchange Act of 1934, Exchange Act Rule 17a-4(b)(4), and FINRA Rules 4511 and 2010.

MM Global Securities is prohibited from:

• Providing market access, as defined by SEC Exchange Act Rule 15c3-5(a)(1), to customers for a period of two years and;
• Engaging in any business in which MM Global Securities provides market access to customers unless and until a registered principal or officer of Respondent certifies in writing to FINRA that the firm revised and enhanced its AML and supervisory procedures related to detecting and investigating suspicious trading activity and potential market manipulation.