Concept and types of market manipulation

Article 12 of the MAR and Article 91 of the MiCAR define the acts covered by the concept of “market manipulation”.

Among other things, they prohibit giving false or misleading signals as to the supply of, demand for, or price of, a financial instrument by entering into a transaction, placing an order to trade or engaging in any other behaviour. The Annex to the MAR contains a non-exhaustive list of indicators of manipulative behaviour relating to financial instruments. For example, if transactions do not lead to a change in beneficial ownership of a financial instrument, this can be an indicator of market manipulation in the form of a wash sale.

Disseminating information which gives false or misleading signals as to the supply or price of a financial instrument or that secures an artificial price level is also prohibited.

Enforcement activities relating to market manipulation

The German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), the MAR and the German Cryptomarkets Supervision Act (Kryptomärkteaufsichtsgesetz – KMAG) grant BaFin wide-ranging powers that it can use to detect cases of market manipulation.

The criminal penalties and administrative fines relating to market manipulation are set out in the WpHG in the case of financial instruments and in the KMAG in the case of crypto assets:

Any person who intentionally or negligently (or recklessly in the case of the MiCAR) engages in market manipulation commits an administrative offence (section 120 (15) of the WpHG and section 47 (3) no. 113 of the KMAG). BaFin investigates cases of market manipulation qualifying as administrative offences and sanctions them by imposing fines. It publishes decisions on measures taken and sanctions imposed in relation to violations of the prohibition on market manipulation on its website (“naming and shaming”; section 125 of the WpHG and section 4 (4) and (5) of the KMAG).

Intentional manipulation that has influenced the stock exchange or market price of a financial instrument or the price of a crypto asset is a criminal offence punishable by imprisonment for up to five years or a fine (section 119 (1) no. 1 of the WpHG, section 46 (2) of the KMAG). BaFin reports cases in which there is reasonable suspicion of intentional violations to the competent public prosecutor.