WASHINGTON - Deutsche Bank Securities and Central States Capital Markets agreed to pay a combined total of $80,000 to settle separate charges that each violated various Municipal Securities Rulemaking Board rules, including supervisory, reporting, and registration failures.
Both firms agreed to settle FINRA’s charges without admitting or denying the findings, the regulatory authority said this month. Deutsche Bank Securities is a New York City-registered division of the Germany-based Deutsche Bank, while Central States is Kansas-based.
FINRA examiners charged Deutsche Bank with violating MSRB reporting, supervisory, and recordkeeping violations stemming from conduct stretching from 2014 to 2017. According to FINRA, the firm failed to properly report 2,440 inter-dealer transactions over a nearly three-year period. FINRA also found 273 instances in which it said the firm improperly reported information to the Real-Time Trade Reporting System that should not have been reported because they were "step outs" rather than inter-dealer transactions.
Further violations alleged by FINRA included failures to report transactions within 15 minutes as required, failures to show the time of trade on dozens of brokerage orders, and more than 14,000 failures to show trade time down to the second.
As such, the firm violated MSRB Rules G-8 on books and records and G-14 on reports of sales or purchases, FINRA concluded. Further, the firm violated Rule G-27 on supervision by not adequately supervising its operations in a way designed to ensure compliance, FINRA said.
The firm’s $70,000 muni fine was a small part of a settlement that totaled $1.4 million, primarily from failures to report other kinds of transactions to the Order Audit Trail System. FINRA has fined several large banks even larger sums for OATS violations over the past three years. Deutsche Bank declined to comment on the settlement.
Central States, which deals primarily in municipal and U.S. government securities, did not have a registered municipal securities principal properly supervising its Wichita branch office from April 2014 until August 2016, FINRA found.
“Though the branch office manager had a Series 24 license, he did not have a Series 53 license, which is required to supervise municipal securities business,” FINRA determined.
The regulator said the firm therefore violated MSRB rules G-2 on standards of professional qualification and G-3 on professional qualification requirements. G-2 prohibits a dealer from doing business unless properly qualified, while G-3 requires a firm to have one or more (depending on size) muni principals registered.
FINRA also dinged the firm for not enforcing its supervisory procedures, a violation of Rule G-27.
The firm agreed to pay a $10,000 fine to settle FINRA’s charges, and also took corrective action, according to a filing submitted to FINRA, designating a properly-registered principal to oversee that office. The firm subsequently decided to end its municipal advisory business.
“Given the small amount of advisory business the firm was doing, it surrendered its advisory designation on Sept. 17,2017,” Central States said. “The firm no longer supports this activity, and thus has no required supervisory function at this time. If it purses this business in the future, it will most definitely have a municipal principal designated a supervisor,” the firm said in its filing.
