Topic Unauthorised business, Consumer protection Illegal investment schemes
Article from BaFin's 2017 annual report
The systematic fight against illegal investment schemes (see info box "Illegal investment schemes") is a prerequisite for maintaining the integrity and stability of the financial centre. It also serves to protect investors and consumers.
Illegal investment schemes
The providers of illegal investment schemes operate without the necessary authorisation and try to remove themselves and their activities requiring authorisation from adequate government controls. In most cases, these participants fail to meet the personal, professional and financial criteria required for conducting such business. Legislators have given BaFin extensive powers of investigation and intervention to uncover business conducted without authorisation, order the transactions to be discontinued and wound up, and to warn the public. BaFin's warnings can be accessed at www.bafin.de.
Responding to information from a variety of sources, BaFin initiated a total of 1,042 new investigations in 2017 (previous year: 1,113); it concluded 873 proceedings (previous year: 962). If an undertaking refuses to cooperate voluntarily, BaFin can issue a formal request for information and the submission of documents and demand detailed information and the disclosure of documents on all business matters. BaFin made use of this important tool in its investigations in 41 cases (previous year: 34); it imposed coercive fines in 8 cases (previous year: 26). In the course of the investigations, BaFin also obtained 16 search warrants (previous year: 34) and on this basis searched a number of residential and commercial properties at various locations with the assistance of the Deutsche Bundesbank and the federal-state police forces.
If the initial suspicion is confirmed, BaFin can order the immediate cessation and winding-up of the transactions and adopt measures in support of these orders. It can thus issue instructions to implicated companies, such as account-keeping credit institutions, or appoint a liquidator and order coercive fines to be threatened and imposed. BaFin issued 20 prohibitive orders in the year under review (previous year: 18). In 18 cases (previous year: 23), the operators had to be formally instructed to wind up their unauthorised business. As in previous years, it was not necessary in the vast majority of cases to issue formal instructions or order coercive measures in 2017, since the operators voluntarily discontinued their unauthorised business when BaFin intervened.
Objections to formal measures in connection with investigation and prohibition proceedings were raised in 37 cases in the year under review (previous year: 72). BaFin concluded 43 proceedings in 2017 (previous year: 77), 21 of them by issuing formal objection notices (previous year: 49).
In 2017, the competent Administrative Court (Verwaltungsgericht) of Frankfurt am Main rejected 1 objection to notices issued by BaFin in summary proceedings; in 1 case, it ordered that the legal remedy should have a suspensory effect. BaFin won the case in 4 principal proceedings, in 1 case, the Administrative Court found in favour of the plaintiff. On appeal, the Higher Administrative Court (Verwaltungsgerichtshof) of Hesse concluded 3 appeal proceedings and 1 case in interim relief proceedings. It ruled in favour of BaFin in all these cases.
