The Financial Industry Regulatory Authority (FINRA), the largest independent regulator for all securities firms doing business in the United States, said on Wednesday that it has fined Deutsche Bank Securities Inc. $6 million for failing to provide accurate and complete “blue sheets” on over 1 million trades from 2008 to 2015, according to a FINRA statement.
Deutsche Bank neither admitted nor denied the charges, but consented to the entry of FINRA’s findings. Also, the bank has agreed to implement enhancements to meet regulatory reporting requirements and retain an independent consultant to remedy issues related to so-called blue sheets, as part of its settlement with the Wall Street’s self-regulator.
According to federal securities laws and self-regulation rules, firms are required to provide certain trade data, aka blue sheets, to FINRA and other regulators electronically upon request. FINRA and the Securities and Exchange Commission (SEC) regularly request such information to help prevent and stop market manipulation and insider trading.
Blue sheets provide critical detailed information about securities transactions, including the security, trade date, price, share quantity, customer name, and whether it was a buy, sale or short sale.
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Last year, the US Securities and Exchange Commission (SEC) fined Oz Management LP, $4.25 million after providing inaccurate blue sheets which consequently led to inaccuracies to the tune of approximately 552 million shares in the brokers’ books and records.
Cameron Funkhouser, Executive Vice President and Head of FINRA’s Office of Fraud Detection and Market Intelligence, said: “Firms are expected to provide complete, accurate and timely blue sheet data in response to regulatory requests. Incomplete and inaccurate blue sheet data compromises our ability to identify individuals engaging in insider trading schemes and other fraudulent activity.”
“Firms must invest the resources necessary to ensure that they are providing complete and accurate blue sheet data whenever requested – without exception,” concluded Funkhouser.
According to FINRA, Deutsche Bank’s blue sheet systems experienced significant failures, including programming errors in system logic, from at least 2008 through 2015. These failures caused the firm to submit thousands of blue sheets to regulators that misreported or omitted critical information.
The regulator said also that from January 2014 to August 2015, approximately 40 percent of Deutsche Bank’s blue sheets submissions did not meet regulatory deadlines, typically 10 business days to respond to the information request. Furthermore, between July and August 2015, more than 90 percent of Deutsche Bank’s blue sheets were not submitted to FINRA on a timely basis.