UPDATE 1-Deutsche Sec sanctioned for excessive client entertainment in Japan

12/12/2013

* Japan financial regulator orders Deutsche Securities to bolster compliance

* SESC said last week Deutsche entertainment of pension officials violated regulations

* Deutsche announces tighter expense procedures, other remedial measures

* Move coincides with bribery investigation into entertainment of one pension fund

TOKYO, Dec 12 (Reuters) - Japan's financial regulator ordered the Tokyo investment banking unit of Deutsche Bank to bolster its compliance after its employees were found to have entertained pension fund officials in violation of financial laws.

The order by the Financial Services Agency (FSA) was widely expected after the securities regulator last week recommended that Deutsche Securities Inc be sanctioned for the entertainment involving officials at three pension funds.

The civil action has overlapped with a criminal bribery investigation into the entertainment of a former official of one of those pension funds. The fund official and a Deutsche Securities sales executive were arrested last week.

The spending on entertainment, which included golf outings and overseas trips, came under scrutiny because the pension officials involved oversaw portfolios partially invested in the national pension scheme. That makes them public officials in the eyes of the law and therefore subject to anti-bribery statutes.

In a statement on Thursday, Deutsche Securities apologised and outlined steps to address the issue including the closing of its pension solutions group, an increase in the staffing of its compliance department and tightening of expense procedures.

In recommending sanctions last week, the Securities Exchange and Surveillance Commission (SESC) criticised Deutsche Securities for failing to catch falsified expense receipts submitted by employees that spent 6.3 million yen ($61,500) entertaining the three pension fund clients between 2010 and 2012.

The FSA's business improvement order requires Deutsche Securities to come up with measures to prevent a recurrence and to report periodically on its compliance to the regulator, according to a statement issued by the FSA on its website.

Deutsche also said that it has been taking disciplinary action against employees responsible for the entertainment, which may include dismissal and reduction in title or pay.



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