Deutsch Bank Securities - ARS Consent Order

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IN THE MATTER OF:

DEUTSCHE BANK
SECURITIES INC.

CRD NO. 2525

("DBSI")

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   CONSENT ORDER


  DOCKET NO. CO-10-7799-S

I. PRELIMINARY STATEMENT

WHEREAS, the Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the General Statutes of Connecticut, the Connecticut Uniform Securities Act (“Act”), and Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies promulgated under the Act (“Regulations”);

WHEREAS, DBSI is a broker-dealer registered in the state of Connecticut;

WHEREAS, the Commissioner, through the Securities and Business Investments Division of the Department of Banking (“Division”), conducted an investigation pursuant to Section 36b-26(a) of the Act into the activities of DBSI to determine whether it had violated, was violating or was about to violate any provisions of the Act or Regulations (“Investigation”);

WHEREAS, coordinated investigations into DBSI’s activities in connection with DBSI’s marketing and sale of auction rate securities (“ARS”) have been conducted by a multi-state task force;

WHEREAS, DBSI has provided documentary evidence and other materials, and has provided regulators with access to information relevant to their investigations;

WHEREAS, Deutsche Bank AG (as parent entity of DBSI) has entered into a Settlement Term Sheet dated August 31, 2008 (“Settlement”) with the North American Securities Administrators Association, Inc. (“NASAA”), which in turn recommended to NASAA members certain settlement terms intended to resolve the investigation into the marketing and sale of auction rate securities by DBSI;

WHEREAS, DBSI and the Commissioner wish to resolve those issues in accordance with the terms of the Settlement and without the expense and delay that formal administrative proceedings would involve;

WHEREAS, DBSI consents to the form and entry of this Consent Order without admitting or denying the allegations set forth herein.

WHEREAS, DBSI agrees that for purposes of this matter, or any future proceedings to enforce this Consent Order by Commissioner, this Consent Order shall have the same effect as if proven and ordered after a full hearing held pursuant to the Act and the Uniform Administrative Procedure Act, Chapter 54, Sections 4-177 to 4-182, inclusive of the General Statutes of Connecticut;

WHEREAS, the provisions set forth in this Consent Order constitute the entire agreement between the Commissioner and DBSI, and shall supersede any conflicting provisions contained in the Settlement;

WHEREAS, in connection with the Findings of Fact and Conclusions of Law contained in this Consent Order, DBSI agrees, inter alia, to reimburse certain purchasers of ARS, and to pay a total fine of Fifteen Million Dollars ($15,000,000) to all the jurisdictions represented by the multi-state task force;

WHEREAS, Section 36b-15(a) of the Act, authorizes the Commissioner to revoke any registration if, inter alia, the commissioner finds that (1) the order is in the public interest, and (2) the registrant has engaged in dishonest or unethical practices in the securities business;

WHEREAS, Section 36b-27(a) of the Act authorizes the Commissioner to order any person who has violated, is violating or is about to violate any provision of the Act or any regulation, rule or order adopted or issued under the Act to cease and desist from such violation;

WHEREAS, Section 36b-27(d) of the Act, as amended by Public Act 09-160, authorizes the Commissioner to impose a fine of up to One Hundred Thousand Dollars ($100,000) per violation against any person who has violated any provision of the Act or any regulation, rule or order adopted or issued under the Act;

WHEREAS, Section 36b-31(a) of the Act provides, in relevant part, that “[t]he commissioner may from time to time make . . . such . . . orders as are necessary to carry out the provisions of sections 36b-2 to 36b-33, inclusive”;

WHEREAS, Section 36b-31(b) of the Act provides, in relevant part, that “[n]o . . . order may be made . . . unless the commissioner finds that the action is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of sections 36b-2 to 36b-33, inclusive”;

WHEREAS, an administrative proceeding initiated under Section 36b-15 of the Act and Section 36b-27 of the Act, as amended, would constitute a “contested case” within the meaning of Section 4-166(2) of the General Statutes of Connecticut;

WHEREAS, Section 4-177(c) of the General Statutes of Connecticut and Section 36a-1-55(a) of the Regulations of Connecticut State Agencies provide that a contested case may be resolved by consent order, unless precluded by law;

II. CONSENT TO WAIVER OF PROCEDURAL RIGHTS

WHEREAS, DBSI, through its execution of this Consent Order, voluntarily waives the following rights:

1.	To be afforded notice and an opportunity for a hearing within the meaning of Sections 36b-15(f) and 36b-27(a) of the Act and Section 36b-27(d)(2) of the Act, as amended, and Section 4-177(a) of the General Statutes of Connecticut;
2.	To present evidence and argument and to otherwise avail itself of Sections 36b-15(f) and 36b-27(a) of the Act and Section 36b-27(d)(2) of the Act, as amended, and Section 4-177c(a) of the General Statutes of Connecticut;
3.	To present its position in a hearing in which it is represented by counsel;
4.	To have a written record of the hearing made and a written decision issued by a hearing officer; and
5.	To seek judicial review of, or otherwise challenge or contest the matters described herein, including the validity of this Consent Order;

NOW THEREFORE, the Commissioner hereby enters this Consent Order.

III. JURISDICTION AND CONSENT TO ENTRY OF CONSENT ORDER

1.	DBSI admits the jurisdiction of the Commissioner, neither admits nor denies the Findings of Fact and Conclusions of Law contained in this Consent Order, and consents to the entry of this Consent Order by the Commissioner.

IV. FINDINGS OF FACT

Auction Rate Securities

2.	ARS as a general term refers to long-term debt or equity instruments tied to short-term interest rates that are reset periodically through an auction process.
3.	An ARS auction is regarded as a “fail” or “failed auction” if there is not a buyer available for every ARS being offered for sale at the auction. In the event of a failed auction, the investors that wished to sell their ARS were unable to do so and would continue to hold the ARS and wait until the next successful auction to liquidate their positions.
4.	Beginning in February 2008, the ARS market experienced widespread failed auctions (“2008 Auction Failures”).
5.	Common categories of ARS instruments include: (1) auction preferred shares of closed-end funds (“Preferreds”); (2) municipal auction rate certificates (“Municipal ARS”); and (3) student loan-backed auction rate certificates (“Student Loan ARS”). The interest rates paid to ARS holders are intended to be set through a Dutch auction process.
6.	The interest rate set at an ARS auction is commonly referred to as the “clearing rate”.
7.	In order to determine the clearing rate, the buy bids are arranged from lowest to highest interest rate (subject to any applicable minimum interest rate). The clearing rate is the lowest interest rate at which all ARS available for sale at the auction can be sold at par value.

DBSI's Marketing and Sale of ARS

8.	DBSI is a Delaware corporation with a primary place of business located at 60 Wall Street, New York, New York.
9.	Deutsche Bank Alex. Brown (“DBAB”), a division of DBSI, provides wealth planning and brokerage services to private, institutional, and corporate clients.
10.	The Corporate and Investment Bank (“CIB”), another division of DBSI, provides capital market financial services to institutions and corporate clients.
11.	DBSI engaged in the marketing and sale of ARS in the state of Connecticut.
12.	Certain DBSI agents solicited sales of ARS to clients; however, certain DBSI agents did not fully comprehend the product, auction process, or the risks.
13.	DBSI did not provide its agents with adequate training concerning the complex characteristics of ARS and risks inherent with this type of investment.
14.	DBSI did not create and maintain adequate written supervisory procedures to ensure its agents provided their clients with adequate disclosure of the complex characteristics of ARS and risks inherent with this type of investment.
15.	Certain DBAB agents misrepresented the characteristics of ARS to clients. Certain DBAB agents told clients that ARS were “safe and liquid,” “cash equivalents,” and “just like money markets.”
16.	Third-party marketing materials about ARS, which were available to DBAB agents, described certain ARS issues as an “AAA-rated source of short-term income” and a “Cash alternative.”
17.	Certain DBAB clients maintained investment policies and objectives designed to place their money in safe and liquid investments.
18.	Certain DBAB agents sold ARS to these DBAB clients, despite their investment policies and objectives which sought safe and liquid investments.
19.	From approximately September 2003 until February 2008, DBAB categorized ARS under the heading “Other – Money Market Instruments” on clients’ monthly account statements.
20.	ARS, unlike money market instruments, are not short-term investments. In fact, ARS bonds may have maturities as long as thirty (30) years and Preferreds have unlimited maturity.
21.	Beginning in 2003, CIB began to underwrite certain Student Loan ARS issues (“CIB SL ARS”). Because CIB had not developed a sales network for those CIB SL ARS, there were instances in which several CIB SL ARS issues were not successfully sold to institutions during the initial offering. As a consequence, CIB purchased and maintained on its books 100 percent of the outstanding ARS for several CIB SL ARS issues, which ultimately allowed the initial offerings for these issues to succeed. Despite this, CIB continued to market those CIB SL ARS to investors. Some of those CIB SL ARS remained on CIB’s books as of the 2008 Auction Failures.
22.	Because certain DBSI agents misrepresented the characteristics of ARS to clients and purchased ARS for clients based upon those misrepresentations, DBSI engaged in dishonest and unethical conduct in the securities business with respect to the marketing and sale of auction rate securities.
23.	By failing to: (i) provide adequate training to agents concerning ARS, (ii) create and maintain adequate written supervisory procedures concerning ARS, and (iii) ensure accurate disclosure of ARS characteristics to clients by its agents, DBSI failed to reasonably supervise its agents with respect to the marketing and sale of auction rate securities.

Conflict of Interest

24. DBAB failed to adequately disclose to clients who purchased ARS that the firm’s roles as underwriter and broker-dealer in certain ARS issues were a conflict of interest, and this conflict may affect the auction clearing rate. As the underwriter and lead manager on four Preferred issues since 1992 1 (“DBAB Managed Preferred”), it was in the interest of the firm to keep the clearing rates low for issuers of the DBAB Managed Preferred. As broker-dealer, the firm had a duty to provide the highest available ARS clearing rates to its clients.

25. DBAB issued a “price talk” document prior to each ARS auction in which it acted as a broker-dealer. This document detailed the interest rate at which DBAB believed the ARS would clear at auction. DBAB determined this rate by utilizing different factors, including the competing interests of both investors and issuers.

26. By failing to fully inform clients about the effect of DBAB’s conflicting roles, as underwriter and broker-dealer of ARS issues, on auction clearing rates, DBSI engaged in dishonest and unethical conduct in the securities business with respect to the marketing and sale of auction rate securities.

27. By failing to ensure adequate disclosure of conflicts of interest concerning ARS to clients by its agents, DBSI failed to reasonably supervise its agents with respect to the marketing and sale of auction rate securities.

Supporting Bids

28. In every auction for the DBAB Managed Preferred, the firm submitted “supporting bids” for its own account that were sufficient to cover the entire allotment of each DBAB Managed Preferred issue. These supporting bids were customary among lead managers to prevent failed auctions and to maintain liquidity for investors. In certain instances, the supporting bids prevented failed auctions, and in others, the supporting bids were unnecessary. However, regardless of the auction outcome, these supporting bids were consistently placed by DBAB, ensuring that successful auctions occurred and liquidity was maintained.

29. DBAB failed to disclose to clients that, in each auction of auction rate preferred issues for which DBAB acted as lead manager, the firm placed supporting bids for the entire allotment of auction rate preferred to ensure a successful auction.

30. DBAB agents were not aware that DBAB placed supporting bids in the auction rate preferred auctions for which DBAB was the lead manager; nor were they aware of the effect of DBAB’s supporting bids on those auctions.

31. In or around August 2007, CIB declined to place supporting bids for certain ARS issued by three special purpose vehicles previously created by Deutsche Bank (called Pivots, Capstans, and Cambers). CIB’s decision to stop submitting supporting bids resulted in failed auctions for these ARS issues.

32. On or around February 13, 2008, the head traders of DBAB’s fixed-income trading desk and CIB’s asset-backed trading desk, each of which handled the firm’s trading in ARS, declined to submit supporting bids for ARS issues in which DBSI was the lead manager. This decision resulted in failed auctions for the ARS issues in which DBSI was a lead underwriter, and a lack of liquidity for clients invested in these issues. Neither DBAB nor CIB has placed a supporting bid since that decision.

33. By engaging in the practice of placing supporting bids to prevent failed ARS auctions and failing to disclose the practice to clients, DBAB engaged in dishonest and unethical conduct in the securities business with respect to the marketing and sale of auction rate securities.

34. By failing to ensure adequate disclosure to clients of DBAB’s practice of placing supporting bids to artificially prevent failed ARS auctions, DBSI failed to reasonably supervise its agents with respect to the marketing and sale of auction rate securities.

V. CONCLUSIONS OF LAW

Solely for the purpose of this Consent Order, and without admitting or denying the allegations set forth herein, DBSI consents to the Commissioner making the following conclusions of law:

1.	In connection with: (i) the misrepresentation of ARS to clients, (ii) the failure to adequately disclose to clients the effect of the firm’s role as underwriter and broker-dealer for ARS issues, and (iii) the use of supporting bids to artificially prevent failed ARS auctions, and failing to adequately disclose the practice to clients, DBSI engaged in dishonest and unethical conduct in the securities business, in violation of Section 36b-4(b) of the Act and within the meaning of Section 36b-15(a)(2)(H) of the Act;
2.	In connection with the failure to (i) provide adequate training to agents concerning ARS, (ii) create and maintain adequate written supervisory procedures concerning ARS, (iii) ensure accurate disclosure of ARS characteristics to clients by its agents, and (iv) ensure adequate disclosure of conflicts of interest concerning ARS to clients by its agents, DBSI failed to reasonably supervise, and establish and enforce procedures necessary to detect and prevent such conduct, in violation of Section 36b-31-6f(b) of the Regulations; and
3.	The activities set forth herein are grounds for the initiation of administrative proceedings under Sections 36b-15(a) and 36b-27 of the Act and for the imposition of such other appropriate remedial measures as may be necessary in the public interest.
4.	The Commissioner finds that the entry of this Consent Order is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of the Act.

VI. CONDITIONS PRECEDENT

As conditions precedent to the entry of this Consent Order, DBSI represents, through its execution of this Consent Order, that DBSI has taken the following measures with respect to current and former customers that purchased “Eligible ARS” from DBSI on or before February 13, 2008 (“Relevant Class”).

For purposes of this Consent Order, “Eligible ARS” shall be defined as ARS purchased from DBSI that were subject to auctions that were not continuously succeeding between February 13, 2008, and August 31, 2008;

DBSI offered to purchase at par Eligible ARS, that were purchased from DBSI prior to February 13, 2008, held by: (i) all individuals; (ii) legal entities forming an investment vehicle for family members including but not limited to IRA accounts, Trusts, Family Limited Partnerships and other legal entities performing a similar function; (iii) all charities and non-profits; and (iv) small to medium sized businesses with assets of $10 million dollars or less with Deutsche Bank as of July 31, 2008 (collectively “Individual Investors”);

DBSI completed all purchases from Individual Investors who accepted the offer (i) prior to November 19, 2008, by November 19, 2008, and (ii) prior to December 31, 2008, by December 31, 2008. For any Individual Investor who accepted the offer between December 31, 2008, and June 30, 2009, DBSI completed the purchase within seven (7) business days of DBSI’s receipt of the Individual Investor’s acceptance. However, Individual Investors could request that DBSI purchase the Eligible ARS on the next scheduled auction date after DBSI’s receipt of its acceptance, in which event DBSI completed the purchase within seven (7) business days of that auction;

DBSI provided notice to customers of the settlement terms and DBSI established a dedicated telephone assistance line, with appropriate staff, to respond to questions from customers concerning the terms of the Settlement;

3. No later than November 19, 2008, any DBSI Individual Investor that DBSI could reasonably identify who sold auction rate securities below par between February 13, 2008, and August 31, 2008, was paid the difference between par and the price at which the investor sold the auction rate securities;

4.
DBSI consented to participate, at the Eligible Customer’s election, in the special arbitration procedures as briefly described below. Under these procedures, the Special Arbitration Process that applies to firms that have entered into settlements with state regulators (“State SAP”), under the auspices of Financial Industry Regulatory Authority (“FINRA”), were and continue to be available for the exclusive purpose of arbitrating any Individual Investor’s consequential damages claim:

a. No later than November 19, 2008, DBSI notified those DBSI Individual Investors who own auction rate securities, pursuant to the terms of the Settlement, that a public arbitrator (as defined by section 12100(u) of the NASD Code of Arbitration Procedures for Customer Disputes, eff. April 16, 2007), under the auspices of FINRA, would be available for the exclusive purpose of arbitrating any DBSI Individual Investor’s consequential damages claim;

b. Arbitration would be conducted by public arbitrators and DBSI would pay all applicable forum and filing fees;

c. Any DBSI Individual Investors choosing to pursue such claims would bear the burden of proving that they suffered consequential damages and that such damages were caused by investors’ inability to access funds consisting of investors’ auction rate securities holdings at DBSI;

d. DBSI shall be able to defend itself against such claims; provided, however, that DBSI shall not contest in such arbitrations liability related to the sale of auction rate securities; and provided further that DBSI would not be able to use as part of its defense a DBSI Individual Investor’s decision not to borrow money from DBSI;

e. Individual Investors who elected to use the State SAP described herein would not be eligible for punitive damages, or any other type of damages other than consequential damages. The State SAP would govern the availability of attorneys’ fees; and

f. All customers, including but not limited to Individual Investors who availed themselves of the relief provided pursuant to this Consent Order, could pursue any remedies against DBSI available under the law. However, Individual Investors that elected to utilize the special arbitration process set forth above would be limited to the remedies available in that process and could not bring or pursue a claim relating to Eligible ARS in another forum.

5.	DBSI endeavored and shall continue to endeavor to work with issuers and other interested parties, including regulatory and governmental entities, to expeditiously provide liquidity solutions for institutional investors not covered by paragraph 2 immediately above. Beginning November 19, 2008, and continuing quarterly until December 31, 2009, DBSI submitted a written report to the representative specified by NASAA (“NASAA Representative”) outlining the efforts in which DBSI engaged and the results of those efforts with respect to DBSI institutional investors’ holdings in auction rate securities. DBSI conferred with the NASAA Representative no less frequently than quarterly to discuss DBSI’s progress, and addressed with the NASAA Representative any related concerns communicated to DBSI by the NASAA Representative and how DBSI would address such concerns;
6.	DBSI refunded refinancing fees DBSI received from municipal auction rate issuers that issued such securities through DBSI in the initial primary market between August 1, 2007 and February 13, 2008, and refinanced those securities after February 13, 2008; and
7.	DBSI made its best efforts to identify Individual Investors who took out loans from DBSI, between February 13, 2008 and June 30, 2009, that were secured by Eligible ARS that were not successfully auctioning at the time the loans were taken out from DBSI. DBSI refunded to those Individual Investors any interest associated with the auction rate securities-based portion of those loans in excess of the total interest and dividends received on the auction rate securities during the duration of the loan. Such refunds occurred on or prior to July 31, 2009.

VII. CONSENT TO ENTRY OF SANCTIONS

WHEREAS, DBSI, through its execution of this Consent Order, consents to the Commissioner issuing an order imposing on it the following sanctions:

1.	Within ten (10) days after the entry of this Consent Order by the Commissioner, DBSI shall pay to the “Treasurer, State of Connecticut”, by certified bank check or by electronic funds transfer or wire transfer, a fine of Three Hundred Forty Three Thousand Four Hundred Eighty-one and 09/100 Dollars ($343,481.09) representing Connecticut’s pro rata share of the $15,000,000 total penalty that DBSI agreed to pay pursuant to the Settlement.
2.	If payment is not made by DBSI, or if DBSI defaults in any of its obligations set forth in this Consent Order, the Commissioner may vacate this Consent Order, in the Commissioner’s sole discretion, upon ten (10) days notice to DBSI and without opportunity for administrative hearing.
3.	This Consent Order concludes the investigation by the Commissioner and any other action that the Commissioner could commence under the Act on behalf of Connecticut as it relates to DBSI’s marketing and sale of ARS to DBSI’s “Individual Investors,” as defined in Section VI.2. of this Consent Order. The Commissioner shall not seek additional monetary penalties from Deutsche Bank relating to DBSI’s marketing and sale of auction rate securities as described herein.
4.	If, in connection with the investigations conducted by the multi-state task force, as described above, DBSI agrees to any subsequent settlement with any NASAA jurisdiction pertaining to its marketing and sale of Eligible ARS to Individual Investors, as defined above, which includes a term or terms analogous to the terms herein which are more favorable to such jurisdiction’s Individual Investors than those terms identified herein, the subsequent term or terms shall be incorporated by reference into this Consent Order and become equally applicable to Connecticut Eligible Investors upon the request of the Commissioner.
5.	This Consent Order is not intended to indicate that Deutsche Bank or any of its affiliates, control persons, or current or former employees shall be subject to any disqualifications contained in the federal securities laws, the rules and regulations thereunder, the rules and regulations of self regulatory organizations or various states’ securities laws including any disqualifications from relying upon the registration exemptions or safe harbor provisions. In addition, this Consent Order is not intended to form the basis for any such disqualifications.
6.	For any person or entity not a party to this Consent Order, this Consent Order does not limit or create any private rights or remedies against Deutsche Bank, its affiliates or control persons, limit or create liability of Deutsche Bank, its affiliates or control persons, or limit or create defenses of Deutsche Bank, its affiliates or control persons to any claims.
7.	Nothing herein shall preclude Connecticut, its departments, agencies, boards, commissions, authorities, political subdivisions and corporations (collectively “State Entities”), other than the Commissioner and only to the extent set forth in paragraph 3 immediately above, and the officers, agents or employees of State Entities from asserting any claims, causes of action, or applications for compensatory, nominal and/or punitive damages, administrative, civil, criminal, or injunctive relief against Deutsche Bank, its affiliates and control persons in connection with the marketing and sale of ARS at DBSI.
8.	This Consent Order shall not disqualify Deutsche Bank, or any of its affiliates, control persons, or current or former employees from any business that they otherwise are qualified or licensed to perform under applicable state law and this Consent Order is not intended to form the basis for any disqualification.

VIII. CONSENT ORDER

NOW THEREFORE, the Commissioner enters the following:

1.	The Findings of Fact, Conclusions of Law and Consent Order set forth herein, be and are hereby entered;
2.	Entry of this Consent Order by the Commissioner is without prejudice to the right of the Commissioner to take enforcement action against DBSI, its affiliates or control persons based upon a violation of this Consent Order or the matters underlying its entry, if the Commissioner determines that compliance with the terms herein is not being observed or if any representations made by DBSI and reflected herein are subsequently discovered to be untrue; and
3.	This Consent Order shall become final when entered.

So ordered at Hartford, Connecticut		_______/s/_________
this 9th day of August 2010.		Howard F. Pitkin
Banking Commissioner

CONSENT TO ENTRY OF ORDER

I, Joseph Polizzotto, state on behalf of Deutsche Bank Securities Inc., that I that I have read the foregoing Consent Order; that I know and fully understand its contents; that I am authorized to execute this Consent Order on behalf of Deutsche Bank Securities Inc.; that Deutsche Bank Securities Inc. agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Deutsche Bank Securities Inc. voluntarily consents to the entry of this Consent Order, expressly waiving any right to a hearing on the matters described herein. Deutsche Bank Securities Inc. further agrees that it shall not claim, assert, or apply for a tax deduction or tax credit with regard to any state, federal or local tax for any administrative monetary penalty that Deutsche Bank Securities Inc. shall pay pursuant to the foregoing Consent Order.

Deutsche Bank Securities Inc.


By:	______/s/__________________
	Name: Joseph Polizzotto
	Title: Managing Director

State of: New York

County of: New York

On this the 30th day of July, before me, Yun Suh, the undersigned officer, personally appeared Joseph Polizzotto, who acknowledged himself/herself to be the Managing Director of Deutsche Bank Securities Inc., a corporation, and that he/she, as such Managing Director, being authorized to do so, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself/herself as Joseph Polizzotto [sic].

In witness whereof I hereunto set my hand.

_________/s/_______________________
Notary Public
Date Commission Expires: March 31, 2011

CONSENT TO ENTRY OF ORDER

I, Robert Rice, state on behalf of Deutsche Bank Securities Inc., that I that I have read the foregoing Consent Order; that I know and fully understand its contents; that I am authorized to execute this Consent Order on behalf of Deutsche Bank Securities Inc.; that Deutsche Bank Securities Inc. agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Deutsche Bank Securities Inc. voluntarily consents to the entry of this Consent Order, expressly waiving any right to a hearing on the matters described herein. Deutsche Bank Securities Inc. further agrees that it shall not claim, assert, or apply for a tax deduction or tax credit with regard to any state, federal or local tax for any administrative monetary penalty that Deutsche Bank Securities Inc. shall pay pursuant to the foregoing Consent Order.

Deutsche Bank Securities Inc.


By:	______/s/__________________
	Name: Robert E. Rice
	Title: Managing Director

State of: New York

County of: New York

On this the 2nd day of August, before me, Yun Suh, the undersigned officer, personally appeared Robert E. Rice, who acknowledged himself/herself to be the Managing Director of Deutsche Bank Securities Inc., a corporation, and that he/she, as such Managing Director, being authorized to do so, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself/herself as Robert E. Rice [sic].

In witness whereof I hereunto set my hand.

_________/s/_______________________
Notary Public
Date Commission Expires: March 31, 2011

___________________________________________________________________________
1. These Preferred issues were Nuveen Maryland Premium Income Municipal Fund 2 (CUSIP No. W67061Q305), and Van Kampen Invest Grade (CUSIP Nos. E920929601, F920929700, and G920929809).

Administrative Orders and Settlements

24.	DBAB failed to adequately disclose to clients who purchased ARS that the firm’s roles as underwriter and broker-dealer in certain ARS issues were a conflict of interest, and this conflict may affect the auction clearing rate. As the underwriter and lead manager on four Preferred issues since 1992 1 (“DBAB Managed Preferred”), it was in the interest of the firm to keep the clearing rates low for issuers of the DBAB Managed Preferred. As broker-dealer, the firm had a duty to provide the highest available ARS clearing rates to its clients.
25.	DBAB issued a “price talk” document prior to each ARS auction in which it acted as a broker-dealer. This document detailed the interest rate at which DBAB believed the ARS would clear at auction. DBAB determined this rate by utilizing different factors, including the competing interests of both investors and issuers.
26.	By failing to fully inform clients about the effect of DBAB’s conflicting roles, as underwriter and broker-dealer of ARS issues, on auction clearing rates, DBSI engaged in dishonest and unethical conduct in the securities business with respect to the marketing and sale of auction rate securities.
27.	By failing to ensure adequate disclosure of conflicts of interest concerning ARS to clients by its agents, DBSI failed to reasonably supervise its agents with respect to the marketing and sale of auction rate securities.

28.	In every auction for the DBAB Managed Preferred, the firm submitted “supporting bids” for its own account that were sufficient to cover the entire allotment of each DBAB Managed Preferred issue. These supporting bids were customary among lead managers to prevent failed auctions and to maintain liquidity for investors. In certain instances, the supporting bids prevented failed auctions, and in others, the supporting bids were unnecessary. However, regardless of the auction outcome, these supporting bids were consistently placed by DBAB, ensuring that successful auctions occurred and liquidity was maintained.
29.	DBAB failed to disclose to clients that, in each auction of auction rate preferred issues for which DBAB acted as lead manager, the firm placed supporting bids for the entire allotment of auction rate preferred to ensure a successful auction.
30.	DBAB agents were not aware that DBAB placed supporting bids in the auction rate preferred auctions for which DBAB was the lead manager; nor were they aware of the effect of DBAB’s supporting bids on those auctions.
31.	In or around August 2007, CIB declined to place supporting bids for certain ARS issued by three special purpose vehicles previously created by Deutsche Bank (called Pivots, Capstans, and Cambers). CIB’s decision to stop submitting supporting bids resulted in failed auctions for these ARS issues.
32.	On or around February 13, 2008, the head traders of DBAB’s fixed-income trading desk and CIB’s asset-backed trading desk, each of which handled the firm’s trading in ARS, declined to submit supporting bids for ARS issues in which DBSI was the lead manager. This decision resulted in failed auctions for the ARS issues in which DBSI was a lead underwriter, and a lack of liquidity for clients invested in these issues. Neither DBAB nor CIB has placed a supporting bid since that decision.
33.	By engaging in the practice of placing supporting bids to prevent failed ARS auctions and failing to disclose the practice to clients, DBAB engaged in dishonest and unethical conduct in the securities business with respect to the marketing and sale of auction rate securities.
34.	By failing to ensure adequate disclosure to clients of DBAB’s practice of placing supporting bids to artificially prevent failed ARS auctions, DBSI failed to reasonably supervise its agents with respect to the marketing and sale of auction rate securities.

State of Connecticut Department of Banking