BaFin to investigate trading disruptions in meme stocks amid “numerous complaints”

Rick Steves

The German regulator will require brokers to remedy their deficiencies and pledged to file criminal complaints in cases of market manipulation.

The German financial watchdog has announced it received many complaints from private investors about trading disruptions at retail brokers, many of whom subject to BaFin supervision. The extremely high volatility experienced in recent days amid the r/WallStreetBets trading mania has caused an overload of trading systems and, ultimately, of individual financial instruments.

The supervisory authority immediately urged the companies to comply with the supervisory requirements and to provide their customers with all services in accordance with supervisory law and without disruption. BaFin pointed to a particular case: German broker Trade Republic failed to provide smooth trading as customers placed orders in GameStop, AMC Entertainment, BlackBerry , Nokia, Express, and Bed Bath & Beyond.

“Due to the unusually high number of complaints received, however, BaFin will exceptionally refrain from responding to the complainants individually”, said the regulator in the official announcement. “The BaFin will then assess whether the companies concerned violated the rules of regulatory law.”

As many retail brokers in the OTC market operate a business under a b-booking model, BaFin stated that “it should be noted that the WpHG obliges companies to provide their services in the interests of their customers. In addition, companies must inform their customers of any conflicts of interest, BaFin expects companies to be able to offer their services in a stable manner even when the markets are extremely volatile. Companies have to have the necessary infrastructure ready for this.”

If the financial watchdog concludes that behind the trading disruptions are deficiencies in brokers’ business organization, trading companies will be required to remedy these deficiencies within a certain period of time. “In the event of serious violations or if a company is unwilling or unable to remedy the deficiency, BaFin can take further measures, for example against the managers”, the regulator continued.

BaFin will also investigate potential market manipulation and if the indications are confirmed, the supervisor will file a criminal complaint with the responsible public prosecutor’s office. Results of the inavestigations – including fines and revocation of permits against trading companies or managers – will be published on the website.

 

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