NASD fines Goldman, Deutsche Bank, Miller Tabak Roberts, Citigroup for high-yield trading violations

By Jeff Pines

Washington, July 28 - The National Association of Securities Dealers fined Goldman Sachs & Co., Deutsche Bank Securities Inc., Miller Tabak Roberts Securities LLC and Citigroup Global Markets Inc. $5 million each for alleged high-yield bond trading violations.

NASD cited the four firms for charging what is said were excessive markups or markdowns, poor record keeping and supervision violations. It also ordered the firms to revise their written supervisory procedures for junk bond sales and purchases within 60 days.

All four firms were ordered to make restitution payments for the alleged markup/markdown violations: nearly $344,000 for Goldman Sachs, $422,000 for Deutsche Bank, $182,000 for Miller Tabak Roberts and $486,000 for Citigroup Global Markets.

None of the firms admitted or denied the charges.

NASD also charged Goldman Sachs, Deutsche Bank and Citigroup Global Markets with trade-reporting violations. It charged Deutsche Bank and Miller Tabak Roberts with failure to register one or more supervisors on the firms' high-yield desks.

NASD found that in 2000 and 2001 Goldman Sachs allegedly charged markdowns ranging from 9.4% to 30.4% on five pairs of trades. From mid-2000 through early 2002, Deutsche Bank allegedly charged markdowns ranging from 9.6% to 16.6% on seven pairs of trades.

In 2001 and early 2002, Miller Tabak Roberts charged markdowns ranging from 9.4% to 18% on three pairs of trades, the NASD said. Finally, from 2000 to early 2002, Citigroup charged markups and markdowns ranging from 13.1% to 32.2% on three pairs of trades, according to the regulator. The firms bore little or no risk in these transactions, the NASD said.

"NASD markup policy has been clear that markups and markdowns generally should not exceed 5% and for most debt transactions that figure should be lower," said Mary Schapiro, NASD vice chair, in a news release.

"Numerous SEC and court rulings have reiterated these principles throughout the years. In the cases we announce today, markups and markdowns were clearly outside these well established guidelines," she added.

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