Deutsche Bank to pay $9.5 million penalty over research info: SEC

October 12, 2016 11:43 AM EDT

The headquarters of Germany's Deutsche Bank is seen in Frankfurt, Germany, September 29, 2016. Picture taken September 29, 2016. REUTERS/Kai Pfaffenbach


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By Sarah N. Lynch

WASHINGTON (Reuters) - Deutsche Bank will pay a $9.5 million penalty to settle civil charges that it failed to properly safeguard material non-public information generated by its research analysts and of publishing an improper research report, U.S. regulators said Wednesday.

The Securities and Exchange Commission said Deutsche Bank's securities unit encouraged its equity research analysts to communicate with customers and its own traders, and failed to implement policies to prevent the analysts from disclosing non-public reports on trading recommendations and changes in estimates.

The bank settled the case without admitting or denying the charges. In a statement, Deutsche spokeswoman Amanda Williams said the bank "takes its research analyst communications and conduct very seriously."

She added that the bank has a robust policy in place and has taken steps to correct issues identified by the SEC.

The SEC also charged the bank for issuing a research report about retailer Big Lots (NYSE: BIG) urging investors to buy stock, even though the former analyst who had prepared it privately told certain bank employees the stock should have been downgraded.

The former analyst, Charles Grom, was charged by the SEC in February. Without admitting or denying the charges, he agreed to pay a $100,000 fine and be suspended from the industry for a year.

The bank had fired Grom in February 2013 "for conduct not consistent with firm standards," according to the SEC's prior order in the matter.

The SEC also charged the bank on Wednesday for failing to provide certain electronic records to the regulator during the course of the probe.

The SEC said it had sought messages on the bank's internal communications system, but the bank "could not represent that it had recovered" all of the messages because it did not preserve them.

The SEC's case against Deutsche Bank harkens back to issues raised more than a decade ago after the agency and the former New York Attorney General struck a global settlement with 10 banks accused of various conflicts of interest in their research departments. Deutsche was not one of those banks.

The 10 banks settled various SEC charges that included issuing fraudulent research reports, receiving payments for research, and issuing reports that were not based on "fair dealing and good faith."

The global settlement required those 10 banks to implement reforms, including separating their research and investment banking units.

(Reporting by Sarah N. Lynch and Mohammad Zargham in Washington; editing by Richard Chang)



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