By Majda Muhic, Fall 2016 Student Intern
Over the last three months, FINRA has fined Deutsche Bank Securities Inc., a subsidiary of Deutsche Bank US, a total of $18.5 million for the company’s alleged failure to comply with FINRA rules and federal securities laws involving the proper handling of information: $12.5 million for Deutsche Bank’s failure to supervise the dissemination of potentially confidential information, and another $6 million for its failure to disclose trade data in a manner required by law. Deutsche Bank’s failure to properly protect and provide information, FINRA found, were violations of both FINRA rules and federal securities laws. The violations have cost the financial giant nearly $20 million. While Deutsche Bank Securities neither admitted nor denied the charges in either case, it consented to the entry of FINRA’S findings as part of the settlement agreements.
Last month, FINRA found that Deutsche Bank Securities disregarded significant risks that confidential information may have be communicated over internal company speakers used to exchange research and trading-related information. According to FINRA’s findings, Deutsche Bank did nothing to change its policies, procedures and systems about who should have access to this information or how the information should be handled despite multiple internal warnings that confidential information may be leaking. This disregard of repeated red flags despite the grave risks involved led FINRA to find Deutsche Bank in violation of its rules and federal securities laws and to fine the company $12.5 million.
Earlier this summer, FINRA also found that Deutsche Bank Securities consistently failed to properly provide trade data, also known as “blue sheets,” as required by FINRA rules and federal securities laws. Blue sheets contain critical information on securities transactions and are used to investigate market manipulation and insider training, and to detect fraud. Companies are required to timely provide complete and accurate blue sheets when requested by FINRA or the SEC.
According to FINRA, errors in Deutsche Bank’s system used to generate blue sheet data caused the company to submit incorrect or incomplete information on over one million trades between 2008 and 2015. The internal errors included both a failure to implement changes in compliance with regulatory reporting requirements and programming errors. FINRA further found that a great number of Deutsche Bank’s blue sheet submissions were untimely. These violations have cost Deutsche Bank Securities $6 million.
Deutsche Bank agreed to address both issues and ensure future compliance by implementing policies, systems and written procedures for both its handling of confidential information and blue sheet submissions.