Germany: Bafin in late trading talks with Hansa
GERMANY - German regulator Bafin has talked to asset manager Hansa Invest over late trading.
Bundesanstalt fuer Finanzdienstleistungsaufsicht received an anonymous tip-off that late trading – which is illegal in Germany – had taken place.
“The trading in question took place some time ago, certainly not this year,” said a Bafin official.
“Bafin has been looking at every investment company in Germany,” said Hansa’s head of marketing Wolff Seitz. “We talked to them last week and we get the impression there wasn’t a case of late trading.”
“There hasn’t been a case of late trading and we wouldn’t say so if we weren’t sure. It was somebody from outside who was spreading a rumour.”
The news comes a month after the European investment fund industry trade body FEFSI, the Fédération Européenne des Fonds et Sociétés d’Investissement, said there was no evidence of US-style market timing problems in the European market.
In Germany, late trading - transacting business after the markets close but at pre-close prices – is illegal. This contrasts with the UK, where the practice is not strictly against the law.
However, Bafin cannot itself impose penalties for late trading, although it has the power to do so for infringements such as insider trading and price manipulation.
The official said: “If late trading were found to have taken place, our job would be to set up arrangements within the company so that it could not happen again. Any sanctions would have to be imposed by the court, if legal proceedings took place.”
But Sabine Lautenschlaeger, head of the Bafin press office, refused to confirm that an investigation was taking place, or which company could be involved.
Robin Clark, global head of compliance, AXA Investment Managers, said: “The feeling in the UK has to be that the FSA’s Financial Services_Authority rules about cut-off, and the depositary’s role, mean that possible late deals are not as great a problem as in the US.”
Clark, acting secretary general for the European Asset Management Association, stressed he was speaking in a personal capacity.
He added: “However, the rules do differ from country to country. And while the scope for late-trading may depend on the markets, a European-domiciled fund may invest in US or Asian stocks so there is clearly some potential for it at mutual fund level.”
Clark said: “Where purchases of mutual funds come in through an intermediary, you have two cut-off periods. So the management company will only see the net purchases or redemptions, and not the underlying detail. Exercising effective control needs to be done not only at management level but also at the level of the intermediary.
“It is impossible to say whether it is being done adequately because you are talking about distributors worldwide. There is certainly a need for regulation not only at management company level but also at the distributor level.”