Deutsche Bank Securities (DB) will pay a $9.5B penalty to the U.S. Securities and Exchange Commission for not properly safeguarding material nonpublic research information. Even though it is settling, Deutsche Bank is not denying or admitting to the findings.
According to the regulator, Deutsche Bank urged its equity research analysts to communicate often with trading personnel, sales staff, and customers, but it did not have in place the proper procedures and policies to stop analysts from disclosing certain information, such as analyses and views that hadn’t been published yet, estimate changes, trading day squawks, short-term trading recommendations, non-deal road shows, and idea dinners. The SEC’s order also found that the bank had put out a research report that had a “BUY” rating for Big Lots, the discount retailer, but that the rating did not line up with the perspective of the analyst who had prepared and certified it as accurate.
This particular individual, analyst Charles Grom, had told others that the discount retailer should have gotten a downgrade. Grom was eventually charged by the SEC with certifying a stock rating in a manner that was not consistent with his own views. He settled the charges with a suspension from the securities industry and by agreeing to pay a $100K penalty.
Also, said the Commission’s order, Deutsche Bank did not correctly preserve and provide specific electronic records that the regulator had asked for during its probe. The records were communications that occurred on DB Chat, which is the firm’s internal messaging system. Deutsche Bank purportedly could not represent that it had recovered all chat communications about equity research personnel during the period at issue because it had not been properly preserved such conversations for several years.
As part of the settlement, Deutsche Bank consented to the entry of the order. In addition to paying the $9.5B penalty, it has agreed to cease and desist from future violations of the Securities Exchange Act of 1934’s Sections 17(a) and 15(g), Rule 17a-4, and Regulation AC’s Rule 501.
This is not the only big case that Deutsche Bank has been dealing with as of late. Deutsche Bank AG is still in talks with the U.S. Department of Justice about how to settle a long-time probe into the way it handled mortgage-backed securities. The DOJ wanted the bank to pay $14B, which Deutsche Bank said is too high. The failure to reach an agreement already has caused shares in Deutsche Bank to plunge.
Meantime, there have been reports that the bank was given special treatment during Eurowide bank stress tests. This purportedly compelled the European Banking Authority to let the German lender include the likely $4B proceeds from a yet-to-be completed sale in its balance sheet so it could enhance its headline capital buffer.
Throughout the US, and for investors outside the country with claims against US-based firms and other financial institutions, the SSEK Partners Group
represents individuals and institutional investors in recouping their securities fraud losses. Please contact us today to ask for your free case consultation with one of our experienced mortgage fraud attorneys.