On February 18, 2022, the regional court in Frankfurt am Main imposed a heavy prison sentence in an insider trading proceeding.
The defendant was sentenced to a total of three years and eight months in prison for engaging in insider trading on multiple occasions. Germany’s securities watchdog BaFin reported the defendant in July and November 2019 and in February 2020 and supported the investigation and court proceedings with witness statements in the main hearing.
According to BaFin, the convict had traded shares and derivatives from various issuers between May 2018 and February 2020, investing a total of around EUR 8.5 million, mainly before takeover bids. The inside information came from a former employee of an investment bank that was involved in almost all of the acquisitions in an advisory capacity. The tipster was sentenced to a total of one year and six months’ imprisonment.
BaFin notes that the use of insider information is prohibited and punishable. Insider trading occurs when people have knowledge of insider information and, based on this knowledge, buy or sell securities of the company concerned in order to gain an economic advantage.
It is also forbidden to pass on insider information to third parties without authorization. Insider information is any fact that is not publicly known that, if it becomes public knowledge, is capable of significantly influencing the price and thus exerting a significant buying or selling incentive on the investor. Insider information can be the knowledge that a publicly traded company is about to take a corporate action or acquire a significant stake.
If there are indications of insider trading, BaFin initiates an insider investigation. If the suspicion is confirmed, the regulator refers the matter to the public prosecutor’s office. Anyone who is aware that someone has violated the ban on insider trading can contact BaFin’s whistleblower office, the police or the public prosecutor’s office.