The U.S. Commodity Futures Trading Commission (CFTC) today issued an order filing and simultaneously settling charges against Deutsche Bank Securities Inc. (DBSI), a registered Futures Commission Merchant (FCM) based in New York, N.Y., for failing to properly invest customer segregated funds, failing to prepare and file accurate financial reports, failing to maintain required books and records, and for related supervisory failures. None of the violations resulted in any customer losses, according to the CFTC’s Order. The Order requires DBSI to pay a $3 million civil monetary penalty and to cease and desist from violating the CFTC Regulations, as charged. DBSI is an indirect, wholly-owned subsidiary of the parent company, Deutsche Bank AG.
Specifically, the CFTC’s Order finds that, for the period June 18, 2012 through August 15, 2012, DBSI failed to accurately compute the amount of customer funds on deposit. As a result of these miscalculations, DBSI’s investment of customer funds in certain money market mutual funds during that period exceeded the 50% asset-based concentration limit for such investments in violation of CFTC Regulation 1.25(b)(3)(i)(F).
The Order also finds that on at least six occasions between June 2011 and March 2013, DBSI failed to file accurate financial statements with the CFTC in a timely manner in violation of CFTC Regulation 1.10. According to the Order, DBSI did not have automated processes in place designed to ensure the accuracy of the firm’s financial reporting. Consequently, DBSI filed six amended FOCUS Reports as a result of the errors, the Order finds. The CFTC Order further finds that DBSI failed to create and maintain complete and systematic records, such as order tickets, for a number of block trades it executed at various times throughout October 1, 2009 and March 16, 2012 in violation of CFTC Regulation 1.35.
The CFTC Order finds that each of these violations was a result of DBSI’s failure to maintain adequate controls and systems, reflecting a lack of supervision over its business as a CFTC registrant in violation of CFTC Regulation 166.3.
CFTC Director of the Division of Enforcement, Aitan Goelman, said, “This case demonstrates that the Commission takes the sufficiency of its registrants’ internal controls very seriously, and expects that these internal controls will both address known issues and identify regulatory risks to minimize the possibility of violations like this.”
The Order recognizes DBSI’s cooperation and corrective action it undertook after its deficiencies were discovered.
The CFTC’s Enforcement Division thanks Jerry Nudge, Kevin Piccoli, Mortimer Rollins and Robert Laverty of the CFTC’s Division of Swap Dealer and Intermediary Oversight for their assistance in this matter.
CFTC Division of Enforcement staff members responsible for this matter are Susan Gradman, Brigitte Weyls, Lindsay Evans, Joseph Patrick, Scott Williamson, Rosemary Hollinger, and Richard Wagner.
For official press release, click here.