(Provisional Translation)
December 5, 2013
Securities and Exchange Surveillance Commission

Recommendation for Administrative Action based on Findings of the Inspection of Deutsche Securities Inc.


1. Contents of the recommendation

Pursuant to Article 20, paragraph (1) of the Act for the Establishment of the Financial Services Agency (FSA), the Securities and Exchange Surveillance Commission (SESC) issued today a recommendation that the Prime Minister and the Commissioner of the FSA shall take administrative action against Deutsche Securities Inc.* (hereinafter referred to as "Company"). This recommendation is based on the findings of the inspection of the Company, whereby the following violations of the law and the ordinance by the Company were identified.

*Basic information regarding Deutsche Securities Inc.

Location: Chiyoda-ku, Tokyo

President and CEO: Makoto Kuwahara

Capital: 72.7 billion JPY

Number of officers and employees: 660

Registration type: Type I Financial Instruments Business, Type II Financial Instruments Business, and Investment Advisory and Agency Business

2. Summary of the findings

Whereas officers at employees’ pension funds are legally considered public officers, it was identified that the Pension Solution Department of the Company had provided officers of three employees’ pension funds with substantial benefits through gifts and entertainment with regard to contracts for financial instruments transactions.

(1) From October 2010 to December 2012, the Company provided officers including the Chairperson of employees’ pension fund A with benefits corresponding to approximately 3.94 million JPY in total for the purpose of selling index-linked bonds structured by the Company’s corporate group and other products (hereinafter referred to as “Index-Linked Bonds, etc.”) to the employees’ pension fund through bearing expenses of an overseas trip and providing them with entertainments approximately forty times.

(2) From December 2011 to December 2012, the Company provided officers including a Managing Director of employees’ pension fund B with the benefits corresponding to approximately 1.43 million JPY in total for the purpose of selling Index-Linked Bonds, etc. to the employees’ pension fund through providing them with entertainments approximately thirty times.

(3) From June 2010 to December 2012, the Company provided officers including Managing Directors of employees’ pension fund C with the benefits corresponding to approximately 0.9 million JPY in total for the purpose of selling Index-Linked Bonds, etc. to the employees’ pension fund through bearing expenses of an overseas trip and providing them with entertainments approximately thirty times.

The above conducts are acknowledged to fall under Article 117(1)(iii) of the Cabinet Office Ordinance on the Financial Instruments Business Operator under Article 38(vii) of the Financial Instruments and Exchange Act, which stipulates “an act of providing substantial benefits to a customer or a third person […] with regard to a contract(s) for a financial instruments transaction(s)”.

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