The German financial supervisory authority, BaFin, is opening up a new line of communication with hedge funds and short sellers to manage market risks by creating a new unit – Market Contact Group (MCG).
The new MCG unit, part of a more general reorganisation of the regulator’s whistleblower office, will start to operate on 16 August in the form of a point of access for market participants without the need for special protection such as hedge fund managers and short sellers, the regulator said in a statement.
BaFin has set up the new MCG unit to coordinate communication with contacts active in the market and manage potential risks requiring clarification, it said. The new unit will actively exchange communication with market players, gather information, examine risks and, if necessary, call on BaFin’s experts for support.
The MCG was established within the so-called competence department, which reports directly to the authority’s management and was set nup to conduct in-depth analysis to classify potential risks.
The whistleblower office will gather information that will be used to improve supervisory work. Whistleblowers can submit information anonymously via an electronic system.
BaFin aims to determine at a very early stage possible violations of the law to act in a targeted manner by means of monitoring activities and by adopting a risk-oriented approach, it said.
The supervisory authority has been under fire for mishandling and not acting promptly in the case that saw accounting irregularities at payment-processing firm Wirecard.
Whistleblowers at the time tried to warn the regulator of some of the malpractices at Wirecard. Short sellers bet on the collapse of Wirecard while BaFin issued an order forbidding new net short positions in Wirecard or to increase existing net short positions.
The Wirecard case recently also led to BaFin changing its internal rules and structure, and to the appointment of a new president.