By Aruna Viswanatha
WASHINGTON--U.S. securities regulators said they need another
two weeks to decide whether Deutsche Bank AG should be able to
continue issuing stocks and bonds without regulatory review, the
latest hiccup for a firm seeking a Securities and Exchange
Commission "waiver" after settling an enforcement case.
On Thursday, Deutsche Bank agreed to pay a record $2.5 billion
in penalties to resolve U.S. and British allegations it manipulated
the Libor benchmark. As part of the deal, a Deutsche Bank unit in
London pleaded guilty to U.S. Justice Department criminal charges.
That made the bank ineligible to retain its "well-known seasoned
issuer" benefits, which aren't available to any issuers who have
themselves or their subsidiaries been convicted of a felony the
past three years, unless they get a waiver from the SEC.
In a letter posted on the SEC's website, an official said the
agency needed additional time to provide the commission with
information about the waiver application. The letter, which said
regulators hadn't been able to complete their "normal procedure"
because of the timing of the criminal proceedings, comes amid
increasing controversy over the SEC's granting of waivers.
The waivers have become a flash point at the commission, with
the SEC's two Democrats publicly dissenting from providing such
relief in several recent cases, arguing the agency has been too
soft on Wall Street firms that repeatedly break the law.
Sen. Elizabeth Warren (D., Mass) lashed out earlier this month
at the SEC and said the agency had declined to use punishments at
its disposal, including revoking a firm's special status as a
"well-known seasoned issuer," which allows large companies to
quickly issue stocks or bonds without an SEC review. Deutsche
Bank's waiver request would allow it to continue operating as a
so-called WKSI.
"It's time to stop recidivism in financial crimes and to end the
slap-on-the-wrist culture that exists at the Justice Department and
the SEC," Ms. Warren said in a speech.
SEC Chairman Mary Jo White last month defended the agency's
waiver process as "thorough, rigorous and principled" and denied
the agency has turned a blind eye to recidivist behavior.
The commission previously granted Deutsche Bank two similar
waivers related to 2007 and 2009 settlements over auction-rate
securities, which the bank said was unrelated to the conduct at
issue in the current request.
In its waiver request to the commission, Deutsche Bank said
revoking the bank's issuer status wasn't necessary to protect
investors because none of the conduct at issue in the criminal case
involved the bank's role as an issuer of securities, and because no
senior officers or directors at the bank were found to have been
involved.
"Determining to maintain ineligible issuer status for Deutsche
Bank AG would, in effect, impose a sanction that would go beyond
the agreed-upon settlement terms...that would be disproportionately
severe given the Conduct that is the subject of the action, the
lack of any nexus to Deutsche Bank AG's public disclosures, and the
duration of time that has passed since the relevant events," the
bank said in its request.
The bank also said in the letter that since January 1, 2014,
Deutsche Bank AG has used its special status to issue some $9.5
billion of securities qualifying as regulatory capital, including
ordinary shares, capital securities and subordinated debt
securities, and more than $15.0 billion in other securities,
including senior debt securities.
According to the SEC's letter to Deutsche Bank, the SEC granted
the bank a temporary waiver through May 7 while it weighed the
request.
A Deutsche Bank spokeswoman said the bank would have no comment
beyond the letter.
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