The Financial Industry Regulatory Authority has fined Deutsche Bank Securities $6 million for failing to provide complete and accurate trade data in an automated format in a timely manner when requested by FINRA and the SEC. As part of the settlement, Deutsche Bank has agreed to retain an independent consultant to improve its policies, systems and procedures related to blue sheet submissions.
FINRA and the SEC regularly request certain trade data, also known as “blue sheets,” to assist in the investigation of market manipulation and insider trading. Federal securities laws and FINRA rules require firms to provide this information to FINRA and other regulators electronically upon request.
Blue sheets provide regulators with 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. This information is essential to regulators’ ability to discharge their enforcement and regulatory mandates.
“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,” Cameron Funkhouser, executive vice president and head of FINRA’s Office of Fraud Detection and Market Intelligence, said in a statement. “Firms must invest the resources necessary to ensure that they are providing complete and accurate blue sheet data whenever requested, without exception.”
FINRA found that from at least 2008 through at least 2015, Deutsche Bank experienced significant failures with its blue sheet systems used to compile and produce blue sheet data, including programming errors in system logic and the firm’s failure to implement enhancements to meet regulatory reporting requirements. These failures caused the firm to submit thousands of blue sheets to regulators that misreported or omitted critical information on over one million trades.
Additionally, FINRA found a significant number of Deutsche Bank’s blue sheet submissions did not meet regulatory deadlines. Firms typically have 10 business days to respond to a blue sheet request. Between January 2014 and August 2015, approximately 40 percent of Deutsche Bank’s blue sheets were filed past the regulatory deadline; and likewise, from July to August 2015, more than 90 percent of Deutsche Bank’s blue sheets were not submitted to FINRA on a timely basis.
In settling this matter, Deutsche Bank neither admitted nor denied the charges, but consented to the entry of FINRA’s findings. FINRA’s investigation was conducted by the Office of Fraud Detection and Market Intelligence, and the Department of Enforcement.