Deutsche Bank Fined $500,000 for Misleading Hedge Fund Investment Process
Posted on Wednesday, May 8th, 2019 at 1:24 pm
In April 2019, the Securities and Exchange Commission (SEC) fined the United States unit of Deutsche Bank $500,000.
According to reports, Deutsche Bank Trust Company Americas claimed to rely on a rigorous testing process when selecting hedge fund investments for its wealth-management clients. However, this was not the case.
Instead, the SEC found that Deutsche Bank only evaluated funds that agreed to share money with the bank. The SEC also found that between 2009 and into 2018, the bank informed clients via their printed marketing materials that they had an in-house research group that used a multi-step due quantitative and qualitative diligence process. The SEC determined that this group strictly reviewed hedge funds that passed on management fees.
In response to the SEC complaint, Deutsche Bank amended its disclosures to reflect that it will only evaluate funds that agree to share fees.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Deutsche Bank may be liable for investment or other losses suffered by its customers.
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