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The Times: Banker departs as Deutsche is fined £6m over Scania

The Times: Banker departs as Deutsche is fined £6m over Scania

By Tom Bawden

DAVID MASLEN, the banker at the centre of a controversial share sale that landed Deutsche Bank with the City watchdog’s third-largest ever fine, left the bank abruptly only days before the fine was made public yesterday.

Mr Maslen was Deutsche Bank’s head of European cash trading when, in March 2004, Volvo hired the bank to sell £1.1 billion of shares that it owned in Scania, the Swedish lorry maker.

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The Financial Services Authority (FSA) fined the bank £6.3 million for “failing to observe proper standards of market conduct”. Mr Maslen was fined £350,000 for “being knowingly concerned in the failure to observe proper standards of market conduct”.

Deutsche Bank confirmed that Mr Maslen had left the company, but declined to say whether he had been dismissed. A spokesman for Mr Maslen denied suggestions that he had been sacked and said that his contract was “terminated by mutual agreement”.

Both fines centre around a fall in Scania’s share price on the morning of March 4, 2004, when Deutsche Bank was in the process of selling the company’s stock for Volvo.

Mr Maslen ordered a trader to buy Scania shares for Deutsche Bank’s own account in the open market after they fell to below the price that they were selling for in the block sale that the bank was running, according to the FSA. The bank’s purchase of Scania shares, which was not communicated to the market, increased demand for the stock and the price rose by 0.85 per cent, putting it back up to the block sale price.

The FSA criticised Mr Maslen for not informing the market about Deutsche Bank’s trading in Scania’s shares, which it said had distorted the true demand for the stock. However, it did not find him guilty of trying to prop up the price of Scania’s shares or to boost demand for the block trade the bank was managing.

In its “final notice” document detailing its investigation, the FSA said: “(Mr Maslen) believed he may not receive a full allocation of the shares if he placed an order in the book as he was of the view that at the time the book build was progressing well. He believed that the Scania shares were an attractive proposition. Mr Maslen therefore instructed a Deutsche trader who reported to him to purchase shares.”

Margaret Cole, the FSA’s director of enforcement, said that the case demonstrated “the commitment we have made towards increasing penalties (for) market misconduct in the interests of deterrent effect”.

The £6.3 billion fine levied on Deutsche Bank is the third- biggest levied by the FSA. Shell had to pay a £17 million fine for market abuse and Citigroup paid a £13.9 million fine.

In a short statement Mr Maslen said: “I wish to emphasise that I fully co-operated with the FSA. The FSA has expressly stated that it does not allege that I deliberately sought to manipulate the market, nor was there deliberate misconduct.”

Deutsche Bank said: “Deutsche Bank voluntarily reported the matter to the FSA and has fully co-operated with its investigation, while also carrying out its own detailed internal review in March-April 2004.

“As a result of its review, Deutsche Bank took disciplinary action and further strengthened a number of procedures.”

TIMETABLE OF TRADING

  • At 10.35am on March 4, 2004, Deutsche Bank announced it would sell 63.7 million shares in Scania, the Swedish truckmaker, on behalf of Volvo, for between 234 and 236.5 Swedish krona each
  • Deutsche’s equity sales team began contacting potential investors to seek indications of interest. The number of shares sought was entered into the electronic order book system, known as the bookbuilder, with the price interested parties were willing to pay
  • By 11.41am Deutsche had received indications of interest for 31 million shares at between SKr234 and SKr236.5. Between 10.40am and 11.40am, Scania’s shares traded at between SKr234 and SKr237
  • Between 11.40am and 11.55am the market price of Scania’s shares fell to SKr231.50, before rising to SKr233
  • At 11.41am David Maslen, Deutsche Bank’s head of equity trading, instructed one of his traders to begin buying shares in the open market, on the bank’s own account
  • At 12.30pm Deutsche Bank announced that 80 per cent of the Scania shares were spoken for
  • By 1.30pm demand for the shares had stalled and at 2.00pm Deutsche Bank ordered 10 per cent of the Scania shares it was selling for Volvo for its own account. The purchase was in addition to the shares it had bought on the open market
  • At 2.50pm, Deutsche announced that the book had closed. It set the price at SKr234 a share, although the shares ended the day on the open market at SKr229
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