Deutsche Bank Securities Inc. agreed Monday to pay $12.5 million to the Financial Industry Regulatory Authority for “significant” supervisory failures related to research and trading-related information it disseminated to its employees, called “hoots” or “squawks,” over internal speakers referred to as “squawk boxes.”
Despite multiple red flags regarding the potential dissemination of confidential information, Deutsche Bank failed to establish adequate supervision over registered reps’ access to hoots or their communications with customers regarding hoots, FINRA said.
“Recognizing and responding to red flags is the hallmark of proper supervision, particularly in areas involving confidential information,” said Brad Bennett, FINRA’s executive vice president and chief of enforcement, in a statement. “Deutsche Bank’s disregard of years of red flags including internal audit findings, risk assessments and compliance recommendations was particularly egregious given the risk that material nonpublic information could be communicated over squawk boxes.”
Deutsche Bank neither admitted nor denied the charges but consented to the entry of FINRA’s findings.