WASHINGTON: A unit of Deutsche Bank AG will pay more than $37 million to settle charges that the bank misled clients about how it routed orders to anonymous trading platforms known as dark pools, regulators said on Friday.
The bank agreed to pay $37 million to settle charges with federal and New York state regulators, and an additional $3.25 million to Financial Industry Regulatory Authority (FINRA), Wall Street's self-funded regulator.
In settling with both the New York Attorney General and the US Securities and Exchange Commission, Deutsche Bank also admitted that its marketing materials were misleading.
The Financial Industry Regulatory Authority (FINRA), Wall Street's self-funded regulator, announced its $3.25 million fine separately, citing "deficient disclosures" concerning dark pool trading.
"Deutsche Bank is pleased to have resolved these matters," Deutsche spokeswoman Amanda Williams said in a statement. "We believe that all concerns described in the settlements, which do not allege intentional wrongdoing or misconduct, have been remediated." This marks the third joint case against a major bank's dark pool trading platform filed this year by the SEC and New York.
Barclays and Credit Suisse have also settled charges in connection with misleading investors in dark pools, a type of alternative trading platform that is similar to an exchange, but with less price transparency.
The SEC and New York Attorney General Eric Schneiderman said Deutsche told investors it was using ongoing data analysis to rank its dark pools best suited for customer orders using a so-called "dark pool ranking model."
But due to a coding error, the bank only updated the ranking model once in two years, causing at least two dark pools to receive inflated rankings the skewed how orders were routed, the SEC said.
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