By Jed Horowitz
Dec 19 A U.S. regulator fined Deutsche Bank Securities $1.25 million and censured it for overstating the trades it made for clients in order to attract more business.
The U.S. broker-dealer of Deutsche Bank AG exaggerated its trading volume by 4 percent, or more than 4 billion shares, between mid-October 2010 and mid-June 2012, the Financial Industry Regulatory Authority said in a consent order filing dated Dec. 14.
FINRA, an industry-funded regulator, found 98 incidents in which Deutsche Bank's traders overstated their volume - by 9,900 percent, in the case of one unnamed security - in the four years ended in June 2012.
FINRA has repeatedly warned broker-dealers about misrepresenting their trading prowess in order to attract big orders from mutual funds, hedge funds and other large investors. The temptation to exaggerate customer trading orders grows in periods of low volume, and the securities industry is completing its fourth year of excessively low trading volume.
Under FINRA rules, brokerage firms are supposed to advertise only actual orders and "indications of interest" that were placed by customers or that they planned to fill from their own inventory to help customers.
In 2007, several big brokerages admitted they had exaggerated order volume on professional systems run by Bloomberg LP, Thomson Reuters and other data providers. On Dec 18, 2007, Deutsche Bank agreed to pay $150,000 and to upgrade its supervisory procedures to avoid violating FINRA rules.
The filing from FINRA's Office of Disciplinary Affairs said the size of the new fine imposed on Deutsche Bank Securities was "mitigated" because the bank cooperated in the investigation, disciplined some traders, and reported other violations before FINRA became aware of them.
"We are pleased to have resolved this matter," a Deutsche Bank spokeswoman said.
Earlier this year, Jefferies Group also received a censure and a fine of $550,000 from FINRA for exaggerating its advertised trading volume after agreeing to a previous censure in 2007.