BaFin regularly publishes notifications on its website informing the public from an early stage about extensive advertising activities for certain shares and advising caution when dealing with buy recommendations of this kind. Often, the purpose of such buy recommendations is to induce investors to acquire the shares in question so that the share price rises in response to the increased demand. This enables the senders of the recommendations or others behind such recommendations who purchased the shares beforehand at a lower price to profit from selling the shares at a higher price.

A market participant felt disadvantaged by this practice. He therefore filed a summary proceeding at the Administrative Court (Verwaltungsgericht) of Frankfurt am Main, demanding the deletion of one such notification. His application was rejected (case ref. 7 L 3357/20.F) and the market participant then appealed to the Higher Administrative Court of Hesse (Hessische Verwaltungsgerichtshof), which confirmed in full the decision passed by the court of first instance (case ref. 6 B 685/21).

“The decisions confirm that BaFin may inform the public of the danger of prohibited market manipulation at the first indication of such dealings,” said BaFin’s Chief Executive Director Beatrice Freiwald, “thereby strengthening trust in the capital market and ensuring market integrity”.

Preventative measures also permitted

Both courts were of the opinion that the criteria for issuing the challenged notification were met under section 6 (2) sentence 1 to 3 of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG) in conjunction with Article 15 and Article 12 of the European Market Abuse Regulation (MAR). BaFin is permitted to publish a notification if there is an imminent risk of the prohibitions and requirements of MAR being infringed. Preventative measures are also permitted under these provisions. It is not necessary that the infringement of the prohibition of market manipulation has actually taken place or been proved.

In the case at issue, there was an imminent danger of market manipulation within the meaning of Article 12 of MAR and, thus, of infringement of the prohibition of market manipulation under Article 15 of MAR. Both courts established that the constitutional rights of the applicant had not been violated. According to the courts, the notification had been made correctly and had taken account of the legal provisions relating to state disclosure of information. BaFin had acted in accordance with its remit and informed the public in a proper and factually correct manner.