The German financial supervisory authority, BaFin, is banning employees mainly active in market surveillance from trading financial instruments on the domestic over-the-counter market from the beginning of September.
The rule is among a series of new instructions that the supervisory authority has started to apply today on employees conducting financial transactions privately.
“The aim of the [new] instructions for private financial transactions [conducted] by BaFin’s employees is to prevent […] the misuse of confidential information,” said Mark Branson, president of the financial supervisory authority.
In the latest version of the instructions BaFin has made use of the option provided in Section 11a (2) of the Finanzdienstleistungsaufsichtsgesetz (FinDAG) – the act that established the supervisory authority – to expand the scope of the ban on trading activities regulated in Section 11a (1) of the FinDAG.
The new instructions replace the guidelines BaFin gave to its employees at the time it revised the compliance rules for private transactions with securities, making them more stringent, in October 2020.
The financial supervisory authority already banned its employees from conducting speculative financial transactions, inducing short-term trading with derivative financial instruments or shares, by combining Section 11a of the FinDAG with the revised compliance rules.
BaFin also prohibited employees from trading shares of supervised companies, and from trading securities of all credit institutions, insurance companies and other financial institutions based in the European Union.
Moreover, all employees at BaFin are not allowed to trade securities on the domestic market, and must report financial transactions starting from €1, according to the rules already in place.
The sum of private financial transactions almost halved in the first half of 2022 at BaFin, compared with the first half of 2021.
BaFin counted a 78% reduction in individual stocks orders, 56% in 2021 and only 23% in 2022, and 4% more orders in funds/ETFs, 23% in 2021 and 45% in 2022, it said.
The financial supervisory authority has cracked down on the conduct of employees, overhauling its structure and statutes, as a consequence of the Wirecard scandal.
It filed a criminal complaint to the public prosecutor’s office in Stuttgart against an employee on suspicion of insider trading in connection with Wirecard, suspended the employee and initiated disciplinary proceedings.
Following the Wirecard scandal, BaFin has detected indications of a violation of the rules on private transactions for 42 employees, with the main allegation being failure to report the transaction immediately, it said.
In three cases the main allegation was speculative trading, and in one case insider trading and a violation of the obligation to cooperate, it said.
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