A former Deutsche Bank analyst agreed to a $100,000 penalty and year-long suspension after improperly approving a stock rating because he wanted to maintain good ties with the company, the U.S. Securities and Exchange Commission said on Wednesday.
The former analyst, Charles Grom, did not downgrade the stock for discount retailer Big Lots Inc from a “buy” recommendation in March 2012, despite his concerns about the company, the SEC said.
A downgrade would not have been “kosher” because Big Lots executives had just visited Deutsche Bank to make a presentation to potential investors, Grom told colleagues during a call at the time, according to the SEC order.
The case shines a spotlight on risks analysts take when placing relationships with issuers ahead of their regulatory obligations. An industry rule requires research analysts to certify that views they express in their reports reflect their beliefs about the company and its securities.
Grom is pleased to put the matter behind him and looks forward to continuing his career in the future, a representative for Grom’s lawyer said. Grom has worked at CRT Capital Group in New York since April 2015, according to a filing.
Grom, whose industry license was registered through Deutsche Bank from 2011 until 2013, neither admitted nor denied the allegations, according to the settlement.
The misconduct followed a March 2012 presentation by Big Lots executives that Grom and Deutsche Bank organized, the SEC said. Grom became concerned by what he believed were cautious comments by the executives at the time, the SEC said.
He discussed Big Lots with a number of hedge fund clients after the event. Four of the hedge funds later sold their entire positions in Big Lots stock, the SEC said.
The next day, however, Grom issued a research report about Big Lots, repeating a previous “buy” rating that was not consistent with Grom’s actual views, the SEC said.
Grom repeated his desire to maintain a good relationship with Big Lots in April 2012 after the company issued a press release about its anticipated weak sales for the quarter, the SEC said.
“Fortunately we told many clients a few weeks back to sell the stock,” Grom said in a conference call at the time, according to the settlement. “I think the writing was on the wall (that) we were getting concerned about it, but I was trying to maintain, you know, my relationship with them.”
Copyright Reuters, 2016
Courtesy : BRecorder