The Financial Industry Regulatory Authority (FINRA) has settled allegations against Deutsche Bank Securities Inc. that will see the firm pay a US$6-million fine and agree to retain a consultant to improve its processes for providing FINRA and the U.S. Securities and Exchange Commission (SEC) with required data on its trading activity.
Regulators use this sort of data, known as “blue sheets,” to aid their surveillance for misconduct such as market manipulation and illegal insider trading. Deutsche Bank settled the case, neither admitting nor denying the charges, but consenting to FINRA’s findings.
FINRA reports it found that from 2008 to 2015, “Deutsche Bank experienced significant failures with its blue sheet systems used to compile and produce blue sheet data, including programming errors in system logic and the firm’s failure to implement enhancements to meet regulatory reporting requirements. These failures caused the firm to submit thousands of blue sheets to regulators that misreported or omitted critical information on over 1 million trades.”
In addition, FINRA found that a “significant number” of Deutsche Bank’s blue sheet submissions did not meet regulatory deadlines.
“Firms are expected to provide complete, accurate and timely blue sheet data in response to regulatory requests. Incomplete and inaccurate blue sheet data compromises our ability to identify individuals engaging in insider trading schemes and other fraudulent activity,” says Cameron Funkhouser, executive vice president and head of FINRA’s Office of Fraud Detection and Market Intelligence, in a statement. “Firms must invest the resources necessary to ensure that they are providing complete and accurate blue sheet data whenever requested — without exception.”