In a civil settlement reached with the US Securities and Exchange Commission, Deutsche Bank Securities will repay commercial mortgage-backed securities customers more than $3.7M over allegedly false and misleading statements related to their purchase of these investments. The firm and its ex-CMBS trading desk head trader Benjamin Solomon agreed to resolve the charges against them but without denying or admitting to regulator’s findings.
According to the SEC’s probe, when selling the CMBSs, Deutsche Bank (DB)’s salespeople and traders made statements that were false and misleading. This caused customers to pay too much for the securities because they were not given accurate information about how much the firm had paid for them. Deutsche Bank also is accused of not having properly designed procedures for surveillance and compliance that could stop and identify the types of wrongful behaviors that would cause commercial mortgage-backed securities buyers financial harm while allowing the firm to profit.
To resolve the CMBS fraud charges, Deutsche Bank will pay customers back all profits on the securities’ trades in which a misrepresentation was made. That figure is over $3.7M, including $1.48M of disgorgement. The bank will also pay a $750K penalty.
Meantime, Solomon, who is accused of supervisory failures and not doing enough to recognize that traders he supervised were making false statements to customers, will pay a $165K penalty. He is suspended from the securities industry for 12 months. Solomon was let go by Deutsche Bank in 2015.
Speaking about the civil case, SEC Enforcement Division’s Complex Financial Instruments Unit Head Daniel Michael said that the firm and Solomon did not properly “keep watch” while traders made Deutsche Bank money as its CMBS customers were suffering harm.
Deutsche Bank has been in the news of late with different securities settlements. Deutsche Bank Securities will pay a $70M in a Commodity Futures Trading Commission case to resolve allegations that it tried to manipulate the ISDAFIX benchmark, which is used for interest rate products. Also, the bank will pay an unrelated $30M penalty in a different CFTC case alleging that it engaged in spoofing and trying to manipulate the precious metals futures market.
SEC Case Against Former Nomura Holdings CMBS Head James
In an different case, this one involving ex-Nomura Holdings CMBS desk and head trader James Im, a federal judge ruled that the SEC can move forward with its civil lawsuit against him. Im is accused of lying about bond prices to increase firm profits and his bonus.
Im allegedly attempted to overcharge bond customers through a number of tactics, including inflating the prices that Nomura actually paid for the securities and understating how much the firm made on these trades.
Im, who wanted the case against him dismissed, has argued that the alleged misstatements he made were, in fact, common practice. The judge, however, said that the regulator had provided “strong circumstantial evidence” to show Im may have engaged in the misbehavior on purpose.
He is one of six individuals from Nomura who are accused of engaging in deceptive practices related to bond trading.
CMBS Fraud Cases
Please contact our commercial mortgage-backed securities fraud law firm today and ask to speak with one of our securities fraud attorneys so that The SSEK Partners Group can help you explore your legal options.
Read the SEC Order (PDF)
Ex-Nomura trader must face US SEC charges over bond price lies, Reuters, February 12, 2018
More Blog Posts from SSEK Law Firm:
Deutsche Bank Securities Must Pay $70M for Trying to Rig the ISDAFIX Benchmark, Institutional Investor Securities Blog, February 7, 2018
Deutsche Bank, UBS, and HSBC Securities Settle Respective Spoofing Cases with the CFTC for $46.6M, Institutional Investor Securities Blog, January 29, 2018
Deutsche Bank Settles Silver Price Rigging Case, Stockbroker Fraud Blog, May 16, 2016