Market manipulation and insider trading
It is not only in Germany that market manipulation (including §20a of the WpHG, §38, paragraph 2 of the BörsG) and insider trading (§14 of the WpHG) offences are punishable by significant fines and imprisonment.
Market manipulation occurs when a person deliberately spreads false information about facts material to the audit, or omits certain information subject to mandatory reporting requirements, thus influencing the market price by deception. The culprits here are often the company management, speculators or so-called ’stock market gurus’, who, e.g. seek to drive up the price of their own or acquired shares or commodity prices by citing inflated figures.
In contrast to this, insider trading occurs when securities are traded on the basis of confidential – that is, not publicly known – information. Here the culprit is typically a person within the company, a consultant or some other person closely associated with the company. And insider trading is no longer something that is agreed during a round of golf. This side of stock exchange dealings has also become more professional in the course of general technical progress. Today, seconds are all it takes to leverage insider information at the push of a button. It is not without reason that BaFin has noted an increase in insider trading proceedings. An insider is not even necessary in some cases; economic and industrial espionage is increasingly targeting internal information for illegal insider trading.
In order to minimise the risk and the likelihood of market manipulation and insider trading, BDO can help introduce effective protections. Here, in particular, dealing with market manipulation and insider trading can play an important role in the orientation of a compliance management system. Potential compliance measures include policies, monitoring mechanisms, awareness training, reporting systems for whistle-blowers and appropriate sanctions.
If suspected cases of market manipulation or insider trading occur despite all precautions, BDO also has experienced forensic investigators and IT forensic experts who are essential when it comes to revealing complex technical processes in securities trading. We can thus help companies, law enforcement agencies and prosecutors in understanding the complex interactions of a potentially wide network of internal and external, known and unknown participants and their actions. To this end, we identify the pertinent documents and transaction and communication data, evaluate systems, hold confrontational interviews and do research into backgrounds and connections. We are happy to compile the results in a report suitable for use in court, if necessary.