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Monex Securities

Monex Securities: Background Information

Monex Securities, Inc. was incorporated in the United States in January of 1992. They provide brokerage services, investment advice and financial products to investors throughout the United States. Their main office is located at 440 Louisiana Street, Suite 1240, Houston Texas.

While Monex Securities, Inc. operates as a separate entity, they are also a wholly-owned subsidiary of their parent company Monex Casa de Bolsa, S.A. de C.V., which in turn is controlled by one Mexico's largest financial conglomerates, Monex Grupo Financiero.

Monex Casa de Bolsa was originally founded in 1978 as Casa de Bolsa Interamericana. A decade later it changed its name to CBI Casa de Bolsa. Then in 2001, the shareholders attained control and altered the name once again to its present form, Monex Casa de Bolsa.

The parent company's main office is in Mexico City but has 42 other locations in Mexico. Monex Casa de Bolsa provides clients with access to futures and derivatives and acts as a "market-maker" in Mexico's Futures market.

Monex Securities is Involved in Several FINRA Complaints

Monex Securities, Inc. is a registered Financial Industry Regulatory Authority ("FINRA") broker-dealer. FINRA regulates all firms in the United States. Its CRD number is 30362 and its SEC number is 8-44874.

It is a US company subject to the jurisdiction of the courts of this country. It is also subject to SEC Regulation and is a member of the Securities Investor Protection Corporation ("SIPC").

The brokerage firm has had several complaints filed against them with FINRA. One such complaint involved Monex Securities, Inc. neither denying nor admitting, but consenting to certain conclusions by FINRA.

FINRA claims the brokerage firm sold/purchased corporate bonds to or from customers (in specific transactions) and failed to do so at a fair price for the customers even taking into account some considerable pertinent circumstances. Monex Securities, Inc. agreed to certain penalties including a fine and a refund to those so harmed.

In another complaint, FINRA concluded that Monex Securities, Inc. was charging excessive "mark-ups" and "mark-downs" on transactions involving foreign bonds which resulted in commissions that were both unreasonable and unfair for the client.

Such actions violated FINRA Rule 2010. The firm agreed to the sanctions under an Acceptance Waiver and Consent ("AWC") agreement. Monex Securities, Inc. also consented to an official Censure and fine.

In a separate incident, Monex Securities, Inc. had a servicing agreement with its parent company involving administrative support and supervisory services. It was signed by the president and chief compliance officer. Monex Securities, Inc. paid commissions to foreign non-FINRA licensed individuals affiliated with its parent entity.

According to an official FINRA document, payment was for the referral of foreign nationals, presumably from Mexico, to open up brokerage accounts and do business with Monex Securities, Inc. These foreign nationals did not possess the proper licenses nor fall under acceptable exemptions.

There are two forms of exemptions for foreign nationals to receive compensation under the Rules. They involve payments related to transactions the client actually completes in the account and payment to the non-US persons for work involving referral of non-US clientele, to an American broker-dealer under the auspices of FINRA. Monex Securities, Inc. did not meet such exemptions. The parent company is not under FINRA regulation.

Monex Securities Made Over $6.3 Million from Improperly Licensed Foreign Affiliates

In one year alone, Monex Securities, Inc. garnered over $6.3 million in revenue from the efforts of these foreign, improperly licensed affiliates who in turn received over $1.6 million in compensation either to the individuals involved (employees of the parent company) or payment was sent to the parent company directly.

The proper way of conducting business would have been limiting the foreign nationals to providing name and contact information (basic referrals) to the properly licensed persons at Monex Securities, Inc. or getting the non-US affiliates the proper licensure and documentation.

To make matters worse, Monex Securities, Inc. intended to delegate its own supervisory duties to the parent company in Mexico. This included supervisory duties on the actions of the foreign affiliates, specifically those person's dealings with US-based clientele, and also the supervisory duties involving "statutory disqualification" of the affiliates under the securities statutes of the United States.

Moreover, FINRA concluded that Monex Securities, Inc. and its management neglected to create and support a supervisory system that was compliant with the securities laws of the United States.

These written supervisory procedures ("WSPs") did discuss the agreement with Monex Securities, Inc. and its parent company, however, the document neglected to address proper protocol for the determination of whether a foreign-affiliated person is required to register with FINRA or otherwise.

Monex Securities, Inc., neither admitting nor denying the allegations, agreed to be censured, pay a fine of $175,000, and also was required to pay 1,100,000, plus interest, in disgorgement of commissions earned from the above-described actions.

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