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Daily Telegraph: Deutsche fined £6.3m for market misconduct

Deutsche fined £6.3m for market misconduct
By Robert Miller (Filed: 12/04/2006)

The London arm of Deutsche Bank has been fined £6.3m for market misconduct by the Financial Services Authority (FSA) the third-largest penalty ever levied by the City watchdog.

David Maslen, former head of European Cash Trading at Germany's biggest bank, was personally fined £350,000, the highest FSA penalty to be levied on an individual.

The watchdog's disciplinary action relates to two separate deals in March 2004. In the first Deutsche, which employs 6,626 staff in London, agreed to buy nearly 64m shares in Sweden's Scania for £1.1bn from Volvo and sell them on through an accelerated book-building exercise.

When the Scania share price dropped below the Deutsche marketing range, Mr Maslen ordered a trader to start buying the shares in the open market to boost the Scania share price.

However, in breach of FSA and internal Deutsche rules, potential investors were not informed.

The watchdog said the Deutsche fine consisted of £3.5m in respect of misconduct in the Scania transaction and £2,363,643 in relation to the losses it avoided through its improper trading. Mr Maslen also had his 2004 bonus reduced by £1.3m.

The FSA, which acknowledged that Deutsche voluntarily reported the rule breach, also fined the bank a further £500,000 for the way in which it conducted a share offering in the Swiss company Cytos Biotechnology.

The investment bank, which is the largest equity trader by volume on the London Stock Exchange, said: “Deutsche Bank regrets the failure to adhere to the high standards that it expects of its staff.” Last year Deutsche hired the FSA's director of enforcement, Andrew Procter, to beef-up its regulatory compliance.

Hector Sants, the FSA's managing director of wholesale business, commented: “Deutsche's failure is an example of the type of conduct which the FSA will act against in its efforts to improve the overall quality of markets.”

Yesterday Mr Procter's successor at the FSA, Margaret Cole, said: “The very significant penalties in this case demonstrate the commitment we have made towards increasing penalties in the interests of deterrent effect.”

Deutsche has been disciplined by City watchdogs for rule-breaches before, most notably in 1997 when it was fined £2m, with £1m costs, relating to the disgraced fund manager Peter Young.

In 2004 Deutsche was fined £190,000 after its traders used information from a client to buy shares that they knew the client planned to buy later in the day.

The largest-ever FSA fine was £17m on Royal Dutch Shell for mis-stating its oil reserves.

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