The Financial Industry Regulatory Authority has fined Deutsche Bank Securities Inc. $3.25 million for failing to provide the same information to all clients of its Alternative Trading System (ATS) relating to certain ATS services and features, and for related violations, according to the announcement.
An ATS is a trading venue that executes trades in securities on behalf of broker-dealers and other traders. Securities and Exchange Commission regulations require that ATS operators disclose certain information to the SEC by filing a Form ATS.
"ATSs are significant and important trading venues in today's equity marketplace," said Thomas Gira, executive vice president of FINRA's Market Regulation Department, in a statement. "Broker-dealers that operate an ATS must provide complete and accurate information to their customers regarding access to the ATS's services and features to ensure that customers using the trading platform are not disadvantaged."
In its Form ATS, Deutsche Bank represented that it would provide all ATS users with "identical access to all services and features" offered by the trading system. FINRA found that Deutsche Bank, however, failed to timely or completely disclose to all users the availability of certain ATS services and features, most of which involved the ability to include or exclude counterparties or groups of counterparties against whom orders would execute.
As a result, some ATS clients – including high-frequency trading firms – requested and received services that others may not have known were available. This meant that although there was no inappropriate sharing of confidential information, all users did not effectively have identical access to all services and features offered by the ATS.
FINRA found that Deutsche Bank also failed to have adequate supervisory procedures in place to ensure that it disclosed material information regarding the ATS's services and features to all users and failed to provide accurate information in its Form ATS filings.
In concluding this settlement, Deutsche Bank neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
Allstate Financial Services Fine $1 Million by FINRA
FINRA fined Allstate Financial Services $1 million for failing to supervise certain communications and transactions, retain certain records, and provide customers with certain required notices and information.
According to FINRA, Allstate Financial Services, the broker-dealer arm of Allstate Insurance Co., omitted approximately 3,500 secondary email accounts from the list of email accounts that the firm monitored. As a result, AFS did not review approximately 44 million emails, which included emails with customers or otherwise relating to the firm's securities business.
FINRA also found that AFS's records for approximately 9,000 customer accounts were missing or incomplete, and were not linked to the firm's software system for sending various notices. As a result, AFS did not verify the identity of certain of those account owners, determine whether recommendations were suitable for those customers, and send required periodic account records and notices explaining the firm's privacy policies to those customers.
According to FINRA, AFS also paid commissions totaling $587,000 in connection with securities transactions to approximately 4,400 unregistered persons who either were previously registered with the firm or at the time worked for affiliated insurance companies, according to FINRA. Most of the payments were trailing commissions that AFS paid to persons who had been registered with the firm, but no longer were registered when they received the payments.
In addition, AFS also incorrectly labeled nearly 2,900 customers' accounts as closed due to an error during a system conversion. Those customers then did not receive required periodic account records and notices explaining AFS's privacy policies.
SEC Charges Platinum Partners and Founder With Defrauding Investors
The SEC charged the founder of Platinum Partners and two of its flagship hedge fund advisory firms with conducting a fraudulent scheme to inflate asset values and illicitly move investor money to cover losses and liquidity problems.
