financial services

Galvin fines Deutsche Bank Securities

Posted 3/19/13

BOSTON – The Secretary of the Commonwealth of Massachusetts William Francis Galvin has fined Deutsche Bank Securities Inc., a subsidiary of Deutsche Bank Akteingesellschaft $17.5 million for failing to disclose conflicts of interest relating to its collateralized debt obligation business-related activities prior to the financial crisis, according to a press release from the secretary of the Commonwealth.

An investigation by the Securities Division focused on DBSI’s failure to disclose its role in proposing, co-investing in, and structuring a $1.56 billion collateralized debt obligation named Carina.

DBSI Special Situations Group created a co-investment CDO proposal implemented with Magnetar Capital LLC, a hedge fund. In all, DSBI and Magnetar co-invested in at least six different CDOs with a a value of $10 billion.

Nowhere in the marketing materials for Carina was there any reference to the conflicts of interest with DBSI SSG and Magnetar in the structuring, underwriting and marketing of Carina.

Within a year, rating agencies had downgraded Carina’s notes to junk status, which resulted in catastrophic losses to investors.

In addition to the $17.5 million fine, DBSI was censured and agreed to cease and desist from conduct violating the state Securities Act.

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