Tuesday, June 11, 2013

German Court Sentences Insider Trader to Five Years in BaFin Enforcement Action

In a trial concerning market manipulation and insider trading based on charges brought by the German Federal Financial Supervisory Authority (BaFin), a Regional Court (Landgericht) sitting in Munich handed down a prison sentence of five years and three months to the insider trader. The court also ordered the defendant to pay a fine of €3.5 million as restitution for injured parties. The Public Prosecutors’ Office in Munich continues its investigations into a number of other suspects that is believed to run into double figures. The action demonstrates the increasing attention that German authorities are giving to insider trading.

Together with others, the convicted businessperson committed fraud concerning a capital increase. He provided falsified bank confirmations to the responsible registration court thereby bringing about an incorrect registration concerning a capital increase. Subsequently, knowing that there had been no capital increase, the defendant carried out share transactions. By issuing contrary buy and sell orders, he generated a share price that did not correspond with the actual supply and demand of the shares. The trader was also involved with others in using false information to attract investors to a company. He used the demand generated by this action to sell his shares via his wife’s securities account and an investment firm.