Two subsidiaries of the Deutsche Bank must pay a fine $US 75 million (almost $ AUD 100 million) to the Securities and Exchange Commission (SEC) for the improper handling of the American Depositary Receipts (ADRs).
According to an official statement from the SEC, Deutsche Bank Trust Co. Americas (DBTCA) and Deutsche Bank Securities (DBSI) allowed pre-released ADRs to be used for unlawful practices.
While neither subsidiary has admitted to the charges, the DBTCA has agreed to pay $US44.4 million (almost $AUD 60 million) in ill-gotten gains, $6.6 million (almost $AUD 9 million) in prejudgement fees interest and more than 22.2million (almost $AUD 30 million) in penalties.
The regulator added that the DBSI is willing to pay 1.1 million (almost $AUD 1.4 million) in disgorgement and prejudgment interest and the nearly 500,000 (almost $AUD 700, 000) in penalties.
The US regulator said that in their investigation they found that the DBTCA provided thousands of pre-release ADRs when ‘neither the customer nor the broker’ had the necessary shares.
DBSI had inadequate systems in place to detect that of 850 inappropriate transactions over a period of 3 years.
“Last year, the SEC announced settled charges against brokers ITG Inc. and Banca IMI Securities Corp., which at times obtained pre-released ADRs from DBTCA and other depositaries and lent them to other brokers, including DBSI. The SEC also charged a former managing director and head of operations at broker-dealer ITG for failing to supervise personnel on ITG’s securities lending desk who improperly handled pre-released ADRs,” The SEC said.
According to the SEC, the investigation is on-going..