- Staff shared unannounced earnings information with investors
- Watchdog says firm's governance and compliance are weak
Deutsche Bank AG’s Japanese brokerage unit faces regulatory penalties for the second time in two years after the nation’s securities watchdog found that the firm improperly shared information about a company’s earnings with clients.
The Securities and Exchange Surveillance Commission recommended that the Financial Services Agency take administrative action against Deutsche Securities Inc., the SESC said in a statement on Tuesday, without specifying the type of penalties sought. The firm’s governance and compliance processes are weak, the commission said.
Around December 2014, a Deutsche Securities equity research analyst interviewed officials from a publicly traded company and received information on its quarterly earnings before they were announced, the SESC said. The analyst then gave the information to 21 salespeople and a client.
The information contained figures that indicated the company’s results may miss market expectations, an SESC official said at a news briefing, asking not to be identified in accordance with its policy. Two of the sales staff shared the information with three Japanese and overseas institutional investors, who then sold shares of the company, which is listed on the first section of the Tokyo Stock Exchange, the official said.
By mishandling the corporate information and using it to solicit investors to trade shares, the company breached securities rules, the commission said.
“Deutsche Securities reported this issue voluntarily and has been conducting a
thorough investigation and making efforts to develop and implement an improvement plan,” Takayuki Inoue, a spokesman for the firm in Tokyo, said by phone.
The FSA ordered Deutsche Securities to improve operations in December 2013 after finding that it provided excessive benefits to pension fund managers. A former employee was convicted of bribery and the firm cut pay of senior executives.