Monthly Archives: April 2013

On April 8, 2013, FINRA announced that it had censured and fined Deutsche Bank Securities Inc. $275,000.00 for violating FINRA’s rules by failing to establish and enforce adequate supervisory procedures regarding dividend-related yield enhancement on total return swap transactions that involve U.S. equities.

An equity-based swap is a contractual arrangement between two parties who agree to exchange cash flows that replicate the economics of owning an underlying equity.  The buyer of a swap has the risks and benefits similar to those of owning the underlying equity, while the seller of the swap has countervailing risks and benefits.  From at least 2002 through 2011, Deutsche Bank did not maintain any written procedures for how to supervise or document decisions that impacted dividend uplift on swap trades referencing U.S. dividend-paying securities.

For the reviews that were conducted, the Firm developed a document so that overall client trading patterns could be monitored and potential red flags regarding the use of Total Return Swaps could be identified by desk personnel.  However, this document and the Firm’s review of it were insufficient in that the document was based on data that did not facilitate adequate monitoring.

Deutsche Bank was aware that it needed to improve its record keeping regarding swaps, so as to better manage risks associated with yield enhancement on Total Return Swaps.  However, the Firm did not put in place systems to retrieve sufficient data for managers’ review of executions made by the desk staff.  The records regarding market-on-close pricing or cross trades were not adequate under NASD Rule 3010.

In settling this matter, Deutsche Bank Inc. neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

On April 4, 2013, FINRA announced that it had censured and fined E*Trade Securities LLC  $30,000.00.  The fine was based on the amount of  excess commissions as well as other excess commissions self-identified and self-reported by firms that are not the subject of the formal charges.

Between July 1, 2009 and September 30, 2009, E*Trade Securities charged a fixed charge of $1.00 per bond for online corporate bond purchases.  In 14 transactions in low priced bonds, this charge was in excess of a fair and reasonable amount, taking into consideration all relevant factors, including the availability of the securities involved in the transaction, the expense of executing or filling the customer’s order, the value of the securities rendered by the firm, and the amount of any other compensation received or to be received by the firm in connection with the transaction.  As a result, the Firm violated NASD Rule 2440.

In settling this matter, E*Trade Securities LLC neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

On April 4, 2013, FINRA announced that it has fined and suspended New York Registered Representative Nicholas P. Bentivegna.

On March 18, 2011 and March 21, 2011, while registered through EKN Financial Services, Inc., Mr. Bentivegna effected six unauthorized transactions in a customer’s account without the customer’s knowledge, authorization or consent.  This is a violation of FINRA Rule 2010, and as a result he consented to a fifteen business day suspension in all capacities from association with any FINRA member firm, and a fine of $5,000.00.  The suspension was in effect from May 6, 2013 through May 24, 2013.

In settling this matter Nicholas P. Bentivegna neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.