Germany’s Federal Financial Supervisory Authority (BaFin) today filed criminal complaint against one of its employees for suspected insider trading in payments company Wirecard.
BaFin said that the employee of the securities supervision department sold structured products based on Wirecard on 17 June 2020. The date is one day before Wirecard’s auditor EY found that 1.9 billion euros ($2.3 billion) in cash balances were missing from trust accounts. German-based payment company filed for insolvency on 25 June.
BaFin refused to name the employee but confirmed their suspension and that the market regulator had opened disciplinary proceedings with state prosecutors in Stuttgart.
Following the Wirecard scandal, BaFin was heavily criticized for missing corporate fraud on such a big scale.
Fabio De Masi, one of the German lawmakers driving a parliamentary inquiry into the affair, commented:
“The finance ministry saw no need to take action on insider trading at the supervisory authorities at the outset of the Wirecard scandal. There is still a need to apply stricter EU rules on insider trading to German authorities. We need rules for ministries and the Bundestag.”
The European Securities and Markets Authority (ESMA) conducted an a assessment in November last year of BaFin and the Financial Reporting Enforcement Panel (FREP) and the events leading to the collapse of the German payments group. The ESMA expressed its belief that the Wirecard’s collapse undermined investor trust and the assessment of the events will help restore the investors’ confidence.
The assessment identified deficiencies in the German supervision of Wirecard and its financial reporting, specifically in the application of the Guidelines on Enforcement of Financial Information (GLEFI) is several sectors. The concerns included BaFin’s independence from issuers and government market monitoring by BaFin and FREP; examination procedures of FREP; and how effective the supervisory system is in the area of financial reporting.
