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FINRA fines Deutsche Bank Securities $3.25 million for deficient disclosures

Image courtesy of Deutsche BankWall Street's independent regulator fined Deutsche Bank Securities Inc. $3.25 million Friday for failing to provide the same information to all users of its off-exchange trading system.

An Alternative Trading System or ATS is non-exchange trading venue that matches buyers and sellers. Each ATS has to be approved by the U.S. Securities and Exchange Commission.

SEC Regulation ATS requires that ATS operators disclose certain information to the SEC by filing a Form ATS.

In its Form ATS, Deutsche Bank represented that it would provide all of its ATS users with “identical access to all services and features” offered by the ATS.

The Financial Industry Regulatory Authority or FINRA found that Deutsche Bank failed to provide all ATS users with a complete description of certain ATS services and features. Most of the undisclosed features involved the ability to include or exclude other parties or groups of parties against whom orders would execute.

Deutsche Bank's failure to disclose those features gave some ATS users -- including high-frequency trading firms -- a potential advantage. They "requested and received services that others may not have known were available," FINRA said.

Deutsche Bank also failed to have adequate supervisory procedures in place to ensure that it disclosed material information regarding the ATS’s services and features to all users, FINRA said.

FINRA -- the biggest independent regulator for all securities firms doing business in the United States -- has now fined Deutsche Bank's securities unit three times in 2016.

In August, Deutsche Bank Securities paid a $12.5 million fine for sending out internal alerts -- hoots and squawks -- that might contain confidential information traders and their customers could use.

FINRA said then that Deutsche Bank ignored multiple red flags about potential confidential information leaking to salespeople and their customers.

In July, the regulator fined Deutsche Bank Securities $6 million for failing to provide complete and accurate trade data to FINRA and the SEC.

It was the biggest fine FINRA had imposed for so-called blue sheet violations.

In reaching Friday's settlement, Deutsche Bank neither admitted nor denied the charges but consented to the entry of FINRA’s findings.


Richard L. Cassin is the publisher and editor of the FCPA Blog.