Deutsche Bank Securities agreed to pay $4.45 million, including nearly $1.5 in disgorgement, to settle SEC charges that the firm's compliance and supervisory failures caused customers to overpay for commercial mortgage-backed securities, due to representatives' false and misleading statements that went unchecked by supervisors.
The findings state that Deutsche Bank Securities Inc and principal Benjamin Solomon failed to reasonably supervise traders, and that the firm failed to prevent and detect antifraud violations regarding commercial mortgage-backed securities (CMBS) transactions, including the firm's failure to prevent and detect salespersons from making false and misleading statements to customers.
As an example, investigators cited a certain trader who purportedly told a customer that the CMBS would be purchased at one price when the actual price the firm paid was lower; as a result, Deutsche Bank Securities made a $104,687 profit, including $94,687 directly attributable to the salesperson's inaccurate statement, when the customer purchased the product for a price higher than the firm actually paid.
Another pointed example features a conversation between a trader and another salesperson, in which the trader pointedly asks, "This is just a lie, right?" in regards to a fictitious second customer the salesperson purportedly invented in order to convince the Deutsche Bank Securities customer to buy at a higher price; the salesperson allegedly responded, "Well, I don't care."
A third instance concerns a trader who allegedly misrepresented that he purchased a bond at a higher price than he actually did, resulting in $125,000 in customer overpayment due to the trader's misstatement.
The supervisory failures charge held that Solomon covered for traders who made false or misleading statements, even when Solmon had been alerted to the fact of these false and misleading statements; accordingly, the report concludes, "some traders believed that Solomon wanted them to deceive customers in order to increase the profits to DBSI on a trade."
If you have invested with Deutsche Bank Securities Inc in commercial mortgage-backed securities products or with any firm, broker, or financial adviser whose false or misleading statements have caused you to overpay for securities, or has otherwise proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.