Deutsche Bank Fined $37 Million for Misleading Clients

Deutsche Bank Fined $37 Million for Misleading Clients

 
Deutsche bank Ag (NYSE:DB) has hit the headline once again for the wrong reasons. Earlier in September 29th, the stock was hammered to a low of $11.19 after the US Justice Department demanded the bank to pay $14 billion in fines for settling allegations of misselling mortgaged backed securities to unsuspecting customers. The bank responded saying that it has no intention to pay anything close to that amount. Furthermore, the bank entered into a €1.09billion agreement with Phoenix Group to sell its Abbey Life insurance business. This alleviated capital adequacy concerns. The bank did not specifically state the amount it has reserved for the settlement of the mortgage securities investigation. However, the balance sheet indicated that the bank held €5.5 billion ($6.2 billion) in litigation reserves. This temporarily removed concerns about the Deutsche bank’s financial standing. However, the bank is now facing some other issues, which is expected to pull the share price down in the coming days.

The New York Attorney General Eric Schneiderman stated that Deutsche bank has agreed to settle the ongoing investigation conducted by the US state and federal authorities (US Securities and Exchange Commission), about its dark pool stock-trading platform, by paying a fine of $37 million.

For years, the bank was saying to its clients that the dark pools would be periodically ranked based on the available liquidity and the quality of execution. However, in reality, Deutsche bank used old rankings dated between 2012 and 2014. Furthermore, the bank failed to completely resolve the issue even after updating the system. More importantly, the clients were not informed about the failure. The bank also did not attempt to sort out the technical problem despite knowing about it for over a year.

The Attorney also opined that by agreeing to pay the fine, the bank has admitted to misleading clients with its marketing materials. Since 2008, the bank has paid about $9 billion in fines and settlements. The figure does not include the settlement to be made for misselling of mortgage backed securities.

The US and UK authorities are also investigating the bank to find out whether its internal tracking system has failed to alert $10 billion worth of transactions carried out with an intention to move money out of Russia. The news is expected to have a short-term negative impact on the stock of Deutsche bank.

The price chart reveals the formation of a near head and shoulder pattern. The neckline at 19.01 was broken on Monday. The MACD indicator is also declining, with the main line below the signal line. Thus we can expect a deep fall in the share price.

Deutsche Bank - Technical Analysis - 20th December 2016

A trader can speculate on the downtrend in the stock by trading a low contract with a binary broker of choice. The entry should be made when the stock trades above the level of $18.50. The contract should also remain valid for one week.


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