Guardian Unlimited

The penalty was levied on the bank for "failing to observe proper standards of market conduct and for failing to conduct its business with due skill, care and diligence".

The illicit transactions occurred in March 2004. The first involved what is known as a "book build" - when an investment bank tries to sell a large parcel of shares to several investors at one time - in shares of Scania, the Swedish truck manufacturer.

According to the FSA, when the share price dropped, David Maslen, Deutsche Bank's former head of European cash trading, instructed a trader to buy shares to push the price back up. Potential investors did not know that Scania's share price had been pushed up by Deutsche Bank's own actions.

"This trading was not transparent to the market and was of a size and manner that contributed to material changes in the Scania B share price during the book build," the FSA said.

In the second case, the FSA said Deutsche Bank failed to ensure a trader carrying out stabilisation trades - essentially purchasing shares after an offering to support the price - in Swiss biotech firm Cytos followed internal procedure. Hector Sants, FSA managing director for wholesale business, said: "The FSA has previously expressed a determination to act against institutional market misconduct and Deutsche's failure is an example of the type of conduct which the FSA will act against in its efforts to improve the overall quality of markets.

The FSA also fined Mr Maslen £350,000 for "being knowingly concerned in the failure to observe proper standards of market conduct" in one of the transactions.

Deutsche Bank said the instances were isolated and involved a small number of individuals.

"There is no finding of deliberately wrongful conduct or of systems failures," the bank said in a statement.

"Deutsche Bank voluntarily reported the matter to the FSA and has fully cooperated with its investigation, while also carrying out its own detailed, internal review in March/April 2004. As a result of its review, Deutsche Bank took disciplinary action and further strengthened a number of procedures."