GERMANY: BaFin provides guidelines on fines for breach of Germany major shareholdings rules

Wednesday December 11 2013

The German securities regulator BaFin has published guidelines detailing how sanctions will be calculated and applied for breaches of rules under the Securities Trading Act. This includes for breach of the disclosure requirements on Germany major shareholders pursuant to section 21, 25 and 25a. Three criteria will be considered when calculating the financial penalty to be imposed –

1. the gravity of the offence (looking at the size of the issuer concerned (market capitalisation) and the seriousness of the surrounding circumstances (including the nature of the infringement, the effects of the infringement on the capital market and the duration of the infringement));

2. Adjustments to the basic amount (whether there are any mitigating or aggravating circumstances – including an admission of guilt, cooperation with the authorities, whether the entity is a re-offender…)

3. Consideration of economic conditions (of the person concerned – adjustments can be made to repayment dates and number of repayments).

The above applies to both legal entites and natural persons.

In relation to the breach of the disclosure obligations in s 21, 25 and 25a, BaFin has provided a table which details the level of the basic fine, taking into account that in normal cases, two fines will be imposed – one for breach of the requirement to report to the issuer, and one for breach of the requirement to inform BaFin. The maximum fine that can be imposed is €1m. The fine will vary depending on whether the breach was caused through recklessness or with intent.

Bafin will consider the following when imposing a fine:

• whether there was a delayed notification
• the level of inaccuracy in a notification (including error on the date of the event triggering the obligation, incorrect information on the name of the declarants and the amount of voting rights held)
• the extent of a change of the voting rights (including complete withdrawal of major shareholder through sale of equity, increase in the amount of voting rights, number of affected voting rights thresholds)
• the triggering Event (such as the result of a corporate action)
• group issues
• the impact of the infringement on the capital market (including free float, major shareholders)
• the need for administrative enforcement

Click on the above link for the guidelines (in German)