Articles Posted in Deutsche Bank

Four Firms Are Ordered to Pay $4.75M for Market Access Rule Violations

The Financial Industry Regulatory Authority, CBOE Holdings company Bats, the New York Stock Exchange, NASDAQ, and their affiliated Exchanges have fined four financial firms $4.75M collectively for violating the Securities Exchange Act of 1934’s Rule 15c3-5, which is also known as the Market Access Rule. The fines are: $2.5M for Deutsche Bank (DB), $800K for J.P. Morgan (JPM), $1M for Citigroup (C), and $450K for Interactive Brokers (IBKR).

The firms have given market access to quite a number clients that engage in millions of trades daily. However, according to FINRA, Bats, NASDAQ, and NYSE, when doing so, they purportedly did not comply with at least one of the Market Access Rule’s provisions when they did not put in place certain risk management controls and procedures so that orders that were “erroneous or duplicative,” or went beyond certain kinds of thresholds, could be detected or prevented. The firms are also accused of not having systems in place for properly supervising customer trading so that “potentially volatile and manipulative activity” could be avoided.

At the yearly general meeting in Germany, Deutsche Bank AG (DB) told shareholders that the German lender is nearing an agreement with ex-executives in which they would have to help pay for the fines that the financial institution paid for their past misconduct. Deutsche Bank has been trying to determine whether it could hold these former executives liable for the different regulatory investigations to which it has been subject. An agreement is expected in the next months.

Bloomberg reports that according to Deutsche Bank CEO John Cryan, former management teams made the German financial institution “too complex and inefficient” when they placed short-term earnings before long-term interest. As a result of misconduct fines that Deutsche Bank was ordered to pay, it experienced two years of losses in a row, not to mention that earlier this year, the German lender agreed to pay US regulators $7.2B because of the way it dealt with mortgage-backed securities leading up to the 2008 financial crisis.

Meantime, along with Nomura Holdings (NMR), Deutsche Bank is dealing with other fraud allegations,this time in Italy for allegedly aiding Banca Monte dei Paschi di Siena S.p.A. in hiding the latter’s losses. In the use of complex derivative trades, thirteen ex-managers at all three banks have been charged with market manipulation and false accounting. The German bank also is accused of running an international crime organization during the relevant period.

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Judge Orders Deutsche Bank Subsidiary to Pay $150Mfor Libor Rigging
A federal judge is ordering Deutsche Bank Group Services, a subsidiary of Deutsche Bank (DB), to pay $150M for its involvement in an interest rate manipulation scam. The London unit pleaded guilty last year to rigging the London Interbank Offered Rate benchmark.

The fine comes two years after Deutsche Bank settled Libor rigging allegations with US and British regulators for $2.5B. According to prosecutors, derivatives traders at the German bank and at other banks colluded together to manipulate LIBOR rates to preference their trading positions.

Libor rigging allegations are not the only claims that Deutsche Bank has been contending with. Recently, the German Bank reached a $7.2B settlement with the US DOJ over its part in the 2008 global financial crisis. Meantime, NY and British officials ordered Deutsche Bank to pay $630M in fines because of alleged money laundering that occurred in Russia.

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$165M Class Action Settlement Reached in MBS Fraud Case Involving NovaStar Securities
Royal Bank of Scotland Group Plc (RBS), Wells Fargo & Co. (WFC), and Deutsche Bank AG (DB) have reached a $165M with investors in their class action mortgage-backed securities case involving underwriting for NovaStar Mortgage Inc., a former subprime lender. The lead plaintiff in the case is the New Jersey Carpenters Health Fund.

NovaStar, which filed for bankruptcy last year, had specialized in low quality residential mortgages. Many of these were bundled into risky securities that were issued prior to the 2008 financial crisis. The class action settlement resolves claims contending that the offering documents put together by the banks misled investors into thinking that the loans underlying about $7.55B of NovaStar MBSs were safe and had been underwritten properly.

A district court judge must still approve the settlement. Meantime, despite the resolution, the banks continue to deny wrongdoing.
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In London, six traders have pleaded not guilty to charges accusing them of trying to rig Euribor, which is the Brussels-based equivalent of the London Interbank Offered Rate (Libor). Euribor is key in establishing the rates on financial contracts, loans, and other financial products around the world.

The defendants include former Deutsche Bank (DB) trader Christian Bittar, current Deutsche trader Achim Kraemer, and former Barclays (BARC) traders Philippe Moryoussef, Colin Bermingham, Carlo Palombo, and Sisse Bohart. They are charged with one count of conspiracy to defraud through the making or obtaining of false or misleading Euribor rates in order allegedly enhance trading profits.

The criminal charges are related to a probe by the Serious Fraud Office. Five other traders from Deutsche Bank and Societe Generale were previously charged.

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Deutsche Bank AG will pay UK and US regulators $630M in fines to settle allegations that it did not stop approximately $10B in suspect trades that may have involved laundering money out of Russia. The trades at issue were mirror trades between the German lenders offices in New York, London, and Moscow. They took place between ’11 and ’15.

It was during this time that Russian blue chip stocks were purchased in rubles for clients and sold in the same amount of stocks at the equivalent price through Deutsche Bank’s London office soon after. As a result, reports The Guardian, funds were transferred through the bank to accounts abroad, including in Latvia, Estonia, and Cyprus.

Deutsche Bank is accused of not getting information about customers that took part in the mirror trades. As a result, the bank’s DB Moscow executed over 2400 pairs of mirror trades. Sellers were registered in locations offshore. Shares in Russian companies were paid for in rubles, the sellers were paid in dollars.

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In a deal reached with the US Justice Department, Société Générale will pay $50M to settle civil charges accusing the bank of hiding that the residential mortgaged-backed securities (RMBS) that it promoted and sold were of poor quality. According to the government, the French bank made false representations involving the SG Mortgage Securities Trust 2006-OPT2, a $780M debt issue that it organized more than a decade ago. As part of the settlement, Société Générale admitted that it hid how many of the loans underlying the RMBS shouldn’t have been securitized or were not properly underwritten.

In a statement of facts, Société Générale took responsibility for its conduct. The bank admitted that it falsely represented that loans underlying the residential mortgage-backed security had been originated according to the underwriting guidelines of the loan originator. It also represented to investors that when the SG 2006-OPT2 was originated, no loans in the RMBS had a combined loan-to-value ratio or loan-to-value greater than 100%–this is a claim that Societe General is now admitting was false.

As a result of the bank’s actions, said the DOJ, investors lost “significant” amounts of money and they may lose more. Investors that were impacted include a number of financial institutions that are federally insured.

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The mortgage securities fraud deal arrived at between Deutsche Bank (DB) and the Department of Justice is now final. As part of the settlement, the German lender will pay a $3.1B civil penalty and $4.1B in relief to borrowers, homeowners, and others that were impacted because it purportedly misled investors about the mortgage securities it was selling before the housing market failed.

Although the agreement was announced last month, the details of the resolution have just been released to the public. This includes information that as far back as May 2006, a Deutsche Bank supervisor had cautioned one of the firm’s senior traders about one mortgage lender that had become too lax with its underwriting practices.

In a Statement of Facts that was part of the agreement, Deutsche Bank acknowledged that it was aware that it was not fully disclosing the risks involved with the loans that it was bundling and selling. Deutsche Bank CEO John Cryan issued a written statement apologizing “unreservedly” for the bank’s conduct. Cryan said that Deutsche Bank now has better standards in place.

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The US government has arrived at multibillion-dollar settlements with Credit Suisse Group AG (CS) and Deutsche Bank AG (DB) to settle allegations involving toxic securities. It also has filed a separate lawsuit against Barclays (BARC) over its alleged sales of toxic mortgage-backed securities.

In the Deutsche Bank case, the US Justice Department had sought $14B to settle allegations that the bank sold investors toxic mortgage securities. Now, the German lender will have to pay $3.1B immediately. It has promised to pay $4.1B over five years to a US consumer relief fund. However, Deutsche Bank remains under investigation by US and UK regulator over suspect trades involving Russian stock, foreign exchange rate rigging, precious metal-related price violations, and alleged violations of US sanctions against number of countries, including Iran.

In the settlement with Credit Suisse, the bank will pay a $2.48B penalty and $2.8B in relief to communities and homeowners impacted by the drop in home prices during the financial crisis. The consumer relief will be paid over five years.

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Deutsche Bank AG (DB) has agreed to pay $37M to conclude the US government probes into its handling of trades in dark pool trading venues. The German bank also admitted that between 1/2012 and 2/2014 traders were misled about the way the it ranked its SuperX dark pool and other trading venues. The government settlements were reached with the US Securities and Exchange Commission and the New York Attorney General. Meantime, the Financial Industry Regulatory Authority fined Deutsche Bank $3.25M, noting “deficient disclosures” involving dark pool trading.

According to the NY AG and the SEC, Deutsche Bank told investors that it ranked its dark pools according to a number of factors, including transaction costs. However, some its technology purportedly wasn’t functioning correctly which means that the order-routing choices were not organized according to the factors noted. The German bank also is accused of disregarding its own method for ranking dark pools and placing its own dark pool in a preferred tier.

The government believes that between 1/2012 and 2/2013, Deutsche Bank employed outdated dark-pool rankings to decide how to route orders rather than updating its ranking model on a regular basis.The bank discovered the technical glitch in 2013, but did not fully correct the issue and waited until the following year to notify clients.

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