Deutsche Bank Securities Inc (DBSI) has agreed to pay a $2.5 million fine as a part of a settlement with the United States Financial Industry Regulatory Authority (FINRA).
For the period of 1998 through 2017, Deutsche Bank Securities did not establish and maintain a supervisory system reasonably designed to achieve compliance with its record retention obligations. This was in violation of NASD Rules 3010 and 2110 and FINRA Rules 3110 and 2010.
During a cycle examination of the firm, FINRA found that DBSI was not in compliance with its recordkeeping obligations.
FINRA has found that DBSI’s supervisory system and written procedures did not reasonably address the requirements of Rule 17a-4(f). The firm did not assign the responsibility for achieving compliance with the firm’s recordkeeping obligations to any particular department, team, or individual. Although the firm’s written procedures for some business units included a reference to Rule 17a-4(f), these did not include guidance to firm personnel about compliance.
The firm stored electronically millions of required records, including its general ledger, supervisory procedures, customer statements and onboarding documents, and notices to customers. However, it did not:
- notify its examining authority (FINRA) 90 days prior to storing records electronically;
- have an audit system “providing for accountability regarding inputting of records . . . to electronic storage media and inputting of any changes made to every original and duplicate record”; and
- retain a third-party vendor with “access to and the ability to download information from the broker-dealer’s electronic storage media to any acceptable medium,” for certain of the documents identified above, and did not obtain an undertaking from any vendor that it would provide requested electronic records to the SEC, FINRA, or any other regulatory authority in the event the firm was unable to provide the records itself.
Finally, DBSI did not store the records identified above in a non-rewriteable, non-erasable format, as required by Rule 17a-4(f). For instance, Deutsche Bank Securities stored certain of these documents on shared electronic drives in a format that was susceptible to alteration or deletion.
On top of the fine, the firm has agreed to a censure.