The Financial Services Authority handed out the third-biggest penalty in its history yesterday, fining the German financial services giant Deutsche Bank £6.4m for market misconduct.
The regulator also landed Deutsche's former head of European cash trading, David Maslen, with a £350,000 fine - the largest financial penalty to ever be levied on an individual.
The fines relate to two transactions carried out in London in March 2004, where Deutsche Bank failed to abide by UK regulations during the sale of shares in two of its institutional clients.
The first of these involved the sale of a large stake in Scania, the Swedish vehicle manufacturer. Deutsche was keen to buy some of the Scania stake for itself, but failed to abide by the strict rules which relate to those involved in the book-building process.
Mr Maslen, who was running the operation, ordered one of his employees to buy shares in Scania on the open market, rather than making the necessary disclosures and buying them via Deutsche's own book-building exercise. The second incident related to several transactions in the shares of a Swiss-listed company, Cytos Biotechnology, where a trader failed to follow internal procedures. The FSA said Deutsche was being disciplined for not taking appropriate action after finding out about the trades.
Commenting on the fines, Hector Sants, the FSA's managing director for wholesale business, said: "The FSA has previously expressed a determination to act against institutional market misconduct and 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.
"The market rightly expects that firms involved in running book-build transactions ensure that they observe proper standards of market conduct and act with due skill, care and diligence in their activities during these transactions. We expect firms, and their staff, to be aware of the issues that are inherent in all transactions, and to ensure that they take steps to manage those appropriately. This is fundamental to maintaining efficient, orderly and clean markets."
In a statement, Mr Maslen said that he had fully co-operated with the FSA. "The FSA has expressly stated that it does not allege that I deliberately sought to manipulate the market," he said.
Deutsche said it regretted the breaches of regulations, adding that they were "isolated instances involving a small number of individuals". It said it believed it had restored market-leading standards within the company.
The FSA said it would have hit the bank with an even larger fine had it not been quick to rectify its procedures once the regulator discovered the rule breaches.
The £6.4m fine comprises a £3.5m penalty relating to the Scania transaction, a further £2.36m for the losses it avoided by buying the Scania shares at a lower price, and £500,000 in relation to the Cytos transaction. The only companies to have been fined more than Deutsche are Shell and Citigroup - £17m and £13.9m respectively for market abuse.Reuse content