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Deutsche Bank Fined Over 'Squawks' Supervision Failure

Zacks Equity Research
Updated

Deutsche Bank AG DB has been slammed with a $12.5 million fine by The Financial Industry Regulatory Authority (FINRA) over substantial supervisory failures tied with research and trading-related information it communicated to its employees.

The German banking giant’s division – Deutsche Bank Securities Inc. – disseminated the concerned information known as 'hoots' or 'squawks,' through internal speakers called 'squawk boxes”. According to FINRA, the company failed to set up adequate supervision over authorized employees’ access to hoots or their communication with customers regarding it.

The regulatory watchdog mentioned that Deutsche Bank was aware that hoots regarding research and trading might include confidential, price-sensitive information, and that posed risk as material non-public information could be broadcasted over them. However, for several years the company repeatedly ignored red flags indicating its inadequate supervision, including internal audit findings and recommendations and multiple internal warnings from the firm's compliance department.

Apart from the fine, Deutsche Bank also agreed to provide a written certification that it has adopted and implemented supervisory systems and written procedures related to hoots. The company neither accepted nor denied the charges, but consented to the entry of FINRA's findings.

Legal woes seem to be never ending for Deutsche Bank. Though the company expects to settle significant cases this year, litigation headwinds are not likely to ease soon as the bank continues to struggle with numerous lawsuits and regulatory proceedings.

 Deutsche Bank currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the foreign banks space include KB Financial Group, Inc. KB, Sumitomo Mitsui Financial Group, Inc. SMFG and Australia & New Zealand Banking Group Limited ANZBY. Both KB Financial and Sumitomo Mitsui sport a Zacks Rank #1 (Strong Buy) while Australia & New Zealand Banking carries a Zacks Rank #2 (Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
DEUTSCHE BK AG (DB): Free Stock Analysis Report
 
AUST&NZ BKG-ADR (ANZBY): Free Stock Analysis Report
 
KB FINL GRP-ADR (KB): Free Stock Analysis Report
 
SUMITOMO-MITSUI (SMFG): Free Stock Analysis Report
 
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Zacks Investment Research