BaFin Fines Volkswagen €1.2 Million Over Failure to Properly Disclose Financial Forecast

Key Takeaways

• €1.2 Million Fine: Germany's Federal Financial Supervisory Authority (BaFin) fined Volkswagen AG €1.2 million for violating the EU's Market Abuse Regulation (MAR).
• Financial Forecast Exceeded Expectations: Volkswagen's forecast for the 2023 financial year was significantly above market expectations, triggering an obligation to disclose the information immediately.
• Improper Disclosure Method: Volkswagen published the information in an ordinary press release rather than the formal ad hoc announcement required under MAR.
• Investor Protection Requirements: MAR's disclosure rules are intended to prevent unfair trading advantages and ensure investors have timely access to market-sensitive information.
• Regulatory Penalties: Violations of Article 17(1) of MAR can result in administrative fines of up to €2.5 million or 2% of total revenue.

Deep Dive

Germany’s Federal Financial Supervisory Authority (BaFin) has fined Volkswagen €1.2 million for failing to properly disclose a financial forecast that significantly exceeded market expectations, in violation of the European Union’s Market Abuse Regulation (MAR).

The fine was imposed because of Volkswagen’s forecast for the 2023 financial year. According to BaFin, the forecast was sufficiently above market expectations to constitute inside information, requiring the company to issue an immediate ad hoc disclosure. Volkswagen instead published the information in a press release, a decision that BaFin found did not satisfy the disclosure requirements under MAR.

The violation was not a failure to make the forecast public, but a failure to publish it in the manner prescribed by law. Under Article 17(1) of MAR, companies must disclose inside information that directly concerns them as soon as possible through the required regulatory process. An ordinary press release does not fulfill that obligation.

BaFin did not identify the specific forecast figures involved, the extent to which they exceeded market expectations, or the date of the original press release. The regulator's findings concerned the disclosure procedure rather than the accuracy of Volkswagen’s financial projections.

The rules apply to companies such as Volkswagen that are domiciled in Germany and issue securities or other financial instruments traded on an organized German market. Inside information is defined as precise, nonpublic information concerning an issuer or financial instrument that would likely have a significant effect on the price of that instrument, or related derivatives, if made public.

Significant differences between a company’s financial results or forecasts and market expectations can meet that definition. When they do, issuers are required to disclose the information promptly and in the legally prescribed format.

BaFin emphasized that these requirements are intended to prevent individuals with privileged access to corporate information from gaining an unfair advantage in securities trading. They also serve to protect investors from making decisions without access to information that could materially affect securities prices.

Failure to publish inside information as soon as possible through an ad hoc disclosure constitutes a violation of the first subparagraph of Article 17(1) of MAR. BaFin can impose administrative fines for such breaches, with the maximum penalty set at €2.5 million or up to 2% of total revenue.

The €1.2 million fine against Volkswagen underscores the importance of assessing financial forecasts against prevailing market expectations before publication. For companies subject to MAR, a significant departure from those expectations can create an immediate disclosure obligation, one that cannot be satisfied merely by including the information in a press release.

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