Deutsche Bank Japan to pay penalty again for information leak

Deutsche Bank AG's Japan branch is facing another penalty after the nation's watchdog found that the brokerage shared information before an earnings release.

According to an article from Markets Regulation, this could spell bad news for the brokerage firm as Japan's very own Securities and Exchange Surveillance Commission recommended "administrative action", which could easily be translated to business improvement or suspension of operations. The latest violation raises concerns about the firm's governance as this is the second time that the company will be sanctioned.

According to Bloomberg Business News, the SESC recommended taking administrative action against Deutsche Bank as they found out that their people improperly shared corporate information and used it to solicit investors to trade shares, which is a serious breach of the securities rules.

According to the SESC, just a year ago, an unidentified Deutsche Securities equity research analyst has conducted an interview with officials from a publicly traded company. The SESC did not reveal the name of the company but it further expressed that the analyst received information on the company's quarterly earnings before official announcement.

The information shows the company is falling below market expectations. This was then divulged to 21 salespeople and a client. Two of their sales staff shared this information to three investors, and were then encouraged to trade company shares before the earnings release.

According to a report from Reuters, Deutsche Bank had identified and reported the issue to the watchdog. The firm said they had since "implemented remedial measures and would continue to reinforce internal controls."

In 2013, the firm was found providing excessive benefits to pension fund managers. As a result, a former employee was convicted of bribery for giving lavish client entertainment. The firm took responsibility and cut senior executives' salary.

Regulators in Japan are strengthening their crackdown on information breaches these days after several brokerages in 2012 were found guilty in leaking advance information of share offerings, which allowed clients to gain profit before earnings release.