Deutsche Bank AG agreed to pay a penalty of GBP 4.7 million to the Financial Conduct Authority for failing to report to it accurately, as required, all of its contract for differences equity swaps from November 5, 2007, through April 19, 2013. FCA alleges that, during this time, Deutsche Bank failed to report correctly over 29 million relevant swaps in that it reported buy transactions as sales and sale transactions as buys. FCA claims Deutsche Bank’s failure was “particularly serious” because FCA had consistently advised firms of the importance of accurate transaction reporting; publicized numerous breaches by other firms of their reporting obligations during the relevant period; and issued a private warning to the bank on June 3, 2010, regarding its reporting failures. CFDs are tradeable instruments that mirror the activity of the referenced asset without their holders actually owning the asset.
Compliance Weeds: This incident again points to the need for regulated firms to test routinely the adequacy of important reports they computer-generate for internal and external use. Too often, either initially or over time, the logic that generates reports overlooks important considerations, and/or the output is not accurate. Only by having an independent tester (including internal audit departments) review output against input is there a possibility that such errors might be detected. (Click here for another example of a computer breakdown causing compliance issues for two firms and Compliance Weeds recommendations in the article “Computer Coding Errors Result in Fines for Two SEC Registrants” in the January 27 to 31 and February 3, 2014 Bridging the Week.)