The Hong Kong Securities and Futures Commission (SFC) has reprimanded and fined Deutsche Bank Aktiengesellschaft (DB) HKD 23.8 million for regulatory breaches involving client fee overcharging, incorrect assignment of product risk ratings and failure to disclose certain investment banking relationships in research reports. The disciplinary action followed investigations triggered by self-reports made by DB between December 2020 and December 2023. The SFC found that, across various periods between November 2015 and November 2023, DB failed to apply agreed discounted management fee rates to 39 discretionary portfolio management accounts, incorrectly valued 392 floating rate debt instruments by applying “fixed” interest rates, and misstated valuations of 16 private equity funds and three real estate funds in monthly statements to 233 clients due to an external vendor oversight and insufficient controls over price updates. These issues resulted in approximately HKD 39 million of overcharged client fees. Separately, DB failed to disclose its investment banking relationships with various Hong Kong-listed companies in 261 single stock reports and 1,590 industry reports issued between September 2014 and September 2021, and incorrectly assigned a lower product risk rating to 40 exchange-traded funds between August 2012 and December 2020, affecting 93 clients and 265 transactions, with 10 resulting transactions identified as risk mismatches after ratings were corrected. In setting the sanctions, the SFC took into account DB’s root-cause reviews, remediation and control enhancements, refunds to affected clients, the inadvertent nature of the breaches, and DB’s cooperation and acceptance of the SFC’s findings and disciplinary action.

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