In one 2012 exchange flagged by the SEC, Solomon bought a bond for DBSI’s account at 58. Shortly thereafter, Trader C offered the bond to a customer at 58.75. The customer responded, “58.25 ur working for too much. be nice.” Trader C replied, “I bought them at 58.5.” Having been misled by Trader C, the customer accepted the offer. Solomon, aware of the spread between the purchase and sale prices, called Salesperson Y to warn him “not that you would, but, uh, [the buyer] thinks we’re just working for a quarter point on those bonds, ok?” Salesperson Y responded “I would never. . . . We need to make money. You deserve to make money, and I deserve to get paid.” DBSI made about $187,500 on this trade, of which $125,000 is attributable to Trader C’s misstatement, the SEC order stated.
To settle the charges, Deutsche Bank agreed to reimburse customers the full amount of firm profits earned on any CMBS trades in which a misrepresentation was made.
Deutsche Bank and Solomon consented to the SEC’s order without admitting or denying the findings. The order notes that the penalty amounts reflect “substantial cooperation” by Deutsche Bank and Solomon during the SEC’s investigation, including remedial efforts by the firm to improve its internal controls, compliance training and surveillance efforts.