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.
Secretary of the Commonwealth of Massachusetts William Francis Galvin,
Deutsche Bank Securities Inc. (DBSI