Hong Kong'sSecurities and Futures Commission (SFC) slapped Deutsche Bank with a $23.8 millionpenalty today (Wednesday), citing widespread failures that led to clients beingovercharged roughly $39 million in fees across multiple business lines.The Germanbank faced disciplinary action for five separate regulatory breaches spanningfrom 2012 to 2023, including systematic overcharging of management fees,botched valuations of debt instruments and funds, and failure to properlydisclose investment banking relationships in research reports.Theviolations came to light through Deutsche Bank's own internal reviews between2020 and 2023, when the bank reported the issues to Hong Kong authorities. TheSFC's investigation revealed problems that stretched back more than a decade insome cases.FeeOvercharging Hits Multiple Client TypesThe SFC said Deutsche Bank "failed to act with due skill, care and diligence, in the best interests of its clients and the integrity of the market" in its disciplinary statement.The mostsignificant breach involved 39 discretionary portfolio management accounts thatwere charged standard management fees instead of agreed-upon discounted ratesbetween June 2016 and September 2022. This error alone cost clientsapproximately $5 million.Theovercharging happened due to what the SFC described as "shortcomings inDB's processes and failures in their implementation." In some cases,relationship managers failed to input discount requests into the bank's system,while in others, the system automatically reverted to standard rates afterportfolio switches without staff realizing discounted rates needed to bere-entered.DeutscheBank also incorrectly valued 392 floating-rate debt instruments by treatingthem as fixed-rate bonds between November 2015 and December 2020. This led towrong portfolio valuations and resulted in 92 clients being overcharged €10,988in total custodian and management fees.A thirdovercharging incident involved 16 private equity funds and three real estatefunds that were incorrectly valued between May 2022 and November 2023. Anoutsourced vendor responsible for updating fund prices stopped doing so due toIT issues but failed to properly escalate the problem. This resulted in 233clients receiving incorrect monthly statements and 32 of them being overcharged$493 in custodian fees.You may also like: Hong Kong Regulator Bans Broker Text Links After Phishing Scams Hit TradersResearchDisclosure Failures Span Seven YearsDeutscheBank's research division failed to disclose investment banking relationships in261 single-company reports and 1,590 industry reports published betweenSeptember 2014 and September 2021. The bank's global research disclosure systemmissed relationships where mandates existed but fees hadn't been received yet,or where mandates weren't properly marked as closed in client systems.The bankalso assigned incorrect product risk ratings to 40 exchange-traded fundsbetween August 2012 and December 2020, affecting 265 transactions involving 93clients. Ten transactions resulted in risk mismatches where products carriedhigher risk than clients' stated tolerance levels. The errors stemmed fromoutdated guidelines and knowledge gaps among operations staff due to turnover.This is notthe first time the SFC has dealt with Deutsche Bank. Nearly 10 years ago, itbanned one of the bank’s Korean employees for involvement in marketmanipulation. In 2021, a former Deutsche Bank trader was sentenced to prisonfor fraud.RegulatoryResponse Considers CooperationThe SFCnoted that Deutsche Bank's breaches were "inadvertent and did not involveany deliberate or intentional misconduct." The regulator factored in thebank's cooperation, including conducting internal reviews, strengtheningcontrols, refunding overcharged fees, and accepting the disciplinary action.DeutscheBank has been registered in Hong Kong since 2008 to conduct securities dealing,advisory services, corporate finance advice, and asset management activities.The bank has already remediated the identified issues and enhanced its internalsystems, according to the SFC.The finerepresents one of the larger penalties imposed by Hong Kong's securitiesregulator in recent years for operational failures. In March,Deutsche Bank also paid a fine of a similar size toGermany’s BaFin for regulatory breaches. However, this is far from therecord penalties the bank has grown accustomed to. Oneexample is the $775 million fine from the U.S. Department of Justice forLibor rigging.This article was written by Damian Chmiel at www.financemagnates.com.