Regulator suspends parts of brokerage unit’s operations


Financial regulators on Wednesday requested that the prosecution investigate Deutsche Bank AG and its staffers for allegedly manipulating stock prices last November.

In addition, they suspended some operations of Deutsche Securities Korea, a brokerage unit of the Germany-based investment bank. The securities firm is banned from selling a certain form of derivatives products for six months until Aug. 22.

The Securities & Futures Commission ― a five-member panel under the wing of the Financial Services Commission ― finalized the sanction on Deutsche Bank, which has been under scrutiny of the Financial Supervisory Service.

The FSS proposed punishment for Deutsche to the SFC earlier this month after completing its probe in January. It dispatched inspectors to a Deutsche branch in Hong Kong in December.

The bank has been suspected of reaping about 40 billion won ($35.7 million) in gains via illegitimate stock trading and enjoyed more than 90 billion won in won-dollar exchange gains.

The FSS alleged that the bank intentionally pulled down prices by dumping a great number of shares on the Korea Exchange after purchasing a fund which guarantees a high return when the prices plunge.

Due to its dubious share-dumping, other investors suffered huge losses all at once. KOSPI plunged 48 points to 1,914.73 during the last two-minutes ― between 2:59 p.m. and 3:01 p.m. ― on the day.

According to the Korea Exchange, the bank was a top seller in most large-cap shares, such as Samsung Electronics, Hyundai Motor, and KB Financial Group.

Attorneys for the bank and brokerage firm reportedly argued that their trading was legitimate at the SFC meeting.

Separately, the Seoul bourse will also take disciplinary measures on Deutsche Securities Korea for allegedly breaching stock disclosure rules.

At the exchange’s panel meeting slated for Feb. 25, there is a possibility that the brokerage unit will be slapped with fines.

Prosecutors have already launched a preliminary inquiry into Deutsche Securities Korea.

The prosecution is poised to form an investigative team as the financial regulators decided to file a complaint against the parent Deutsche Bank.

The issue is whether the prosecution will widen the scope of inquiry to investigate the bank’s headquarters in Frankfurt as well as branches in Hong Kong and Seoul.

The prosecution could charge the investment bank’s staffers who initiated the trading and suspend its businesses under regulatory rules.

By Kim Yon-se (kys@heraldcorp.com)