British probe

Securities packaged by Deutsche Bank are among half a dozen deals being examined by the Britain's Serious Fraud Office (SFO), the Financial Times reported on Monday.

The newspaper said the probe is part of an evidence-gathering exercise into whether financial institutions fraudulently misrepresented deals to clients and counter-parties in the UK.

The SFO has spent the past two years looking into sales of asset-backed securities– bonds backed by the repayments on vast pools of loans such as mortgages – after consulting senior financial figures about which areas it should examine in the wake of the financial crisis.

Information, anyone?

The SFO has not yet launched an official investigation into any company, but it is calling for informants to come forward and provide the evidence it needs to bring any case. The agency could criminally prosecute a company or individuals or bring a civil recovery case if it can prove illegal activity.

"It's a high hurdle to overcome in relation to prosecution of a company because we have to prove a directing mind – that there was a directing of the fraud," SFO director Richard Alderman told the Financial Times.

"That's why it is very important to get whistleblowers as they are the best source of evidence."

US scrutiny

Last week a number of Asian, European and US investment banks were sued by the US Federal Housing Finance Agency for allegedly mis-selling mortgage-backed securities.

The FHFA is suing 17 financial institutions, including Deutsche Bank, Nomura, Barclays and Bank of America, over losses on nearly $200 billion of subprime bonds.

Deutsche Bank did not comment on the investigation in Britain but referred to comments made by chief executive Josef Ackermann in May, when he said the bank would defend itself "vigorously" against attacks it felt were "unjust."

Shares in Deutsche Bank opened down 4 per cent on Monday following news of the SFO's investigations.

Author: Sam Edmonds (Reuters, dpa)
Editor: John Blau