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No liability of the German Federal Financial Supervisory Authority (BaFin) in connection with the so-called "Wirecard balance sheet scandal" - Federal Court of Justice rejects an investor's appeal against denial of leave to appeal

Decision of January 10, 2024 - III ZR 57/23

The Third Civil Senate of the Federal Court of Justice, which is responsible, among other things, for public liability law, has rejected the appeal lodged by the plaintiff against the decision of the Higher Regional Court of Frankfurt am Main of March 30, 2023 (1 U 183/22) against the non-admission of the appeal in proceedings pursuant to Section 522 (2) ZPO. 
Facts of the case:  

The plaintiff is claiming damages from the defendant Federal Financial Supervisory Authority (BaFin) on the basis of his own and his wife's assigned rights in connection with the acquisition of shares in the now insolvent Wirecard AG from the point of view of official liability and state liability under EU law. 

The defendant, an independent institution under public law, is responsible, among other things, for supervising compliance with the provisions of the German Securities Trading Act (WpHG). This primarily concerns balance sheet control and market abuse monitoring. In the period from December 21, 2004 to December 31, 2021, balance sheet control was carried out on the basis of a two-stage "enforcement procedure" (Sections 37n ff WpHG aF and - from January 3, 2018 - Sections 106 ff WpHG aF).

As an issuer of shares, Wirecard AG was subject to financial market supervision and balance sheet control by the defendant. The annual and consolidated financial statements and management reports of Wirecard AG up to and including the 2018 fiscal year had each been audited by the auditor with an unqualified audit opinion.

n June 18, 2020, Wirecard AG published an ad hoc announcement stating that the auditor had reported that there was not yet sufficient audit evidence regarding the existence of bank balances in escrow accounts totaling € 1.9 billion (around a quarter of the Group's total assets). On June 22, 2020, the Management Board of Wirecard AG announced in a further ad hoc announcement that alleged assets of € 1.9 billion at two banks in the Philippines were highly unlikely to exist. Three days later, Wirecard AG filed for the opening of insolvency proceedings over its assets, which were opened by the Munich Local Court on August 25, 2020. In previous years, there had already been repeated media reports, particularly in the "Financial Times", about (accounting) irregularities in the Wirecard Group.
Course of the proceedings:  

The Regional Court dismissed the claim for payment of € 64,833.75 plus interest. The Higher Regional Court dismissed the plaintiff's appeal by order pursuant to Section 522 (2) ZPO. The plaintiff contests this with his appeal against denial of leave to appeal.

The decision of the Federal Court of Justice:  
The plaintiff's appeal against denial of leave to appeal is unsuccessful because the admission requirements of Section 543 (2) sentence 1 ZPO are not met.
The Court of Appeal rightly denied the plaintiff's claim for damages based on official liability (Section 839 (1) sentence 1 BGB in conjunction with Art. 34 GG) or from the perspective of a claim for state liability under EU law. The legal issues raised by the complaint as fundamental, in particular with regard to the provisions of Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonization of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2011/34/EC (Transparency Directive) and Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (Market Abuse Regulation), are not relevant to the decision. The measures taken by the defendant in the context of market abuse monitoring and balance sheet control with regard to Wirecard AG in the period from April 2015 to June 2020 are not objectionable either under Section 6 or Sections 106 et seq. of the WpHG (old version) or with regard to the provisions of the Transparency Directive or the Market Abuse Regulation and were in any case justifiable if the interests of effective balance sheet control were fully safeguarded.

A referral to the Court of Justice of the European Union pursuant to Art. 267 (1) and (3) TFEU is therefore not necessary. This also applies to the question of whether Section 4 (4) of the Financial Services Supervision Act (FinDAG) is inapplicable with regard to EU law requirements of the Market Abuse Regulation. The plaintiff's other complaints (divergence from Senate case law, right to be heard) also fail.  

The Senate has refrained from giving further reasons in accordance with section 544 (6) sentence 2 half-sentence 2 ZPO.
Lower courts:  

Regional Court of Frankfurt am Main - Judgment of June 2, 2022 - 2-20 O 35/22 
Higher Regional Court of Frankfurt am Main - Decision of March 30, 2022 - 1 U 183/22

The relevant provisions are as follows:  
§ Section 342b HGB aF (version valid until December 31, 2021) - Financial Reporting Enforcement Panel  
(1) 1The Federal Ministry of Justice and Consumer Protection may, in agreement with the Federal Ministry of Finance, recognize by contract an institution organized under private law to audit violations of accounting regulations (Financial Reporting Enforcement Panel) and assign it the tasks specified in the following paragraphs. 

(2) 1The Panel shall examine whether the most recently adopted annual financial statements and the associated management report or the most recently approved consolidated financial statements and the associated group management report, the most recently published condensed financial statements and the associated interim management report as well as the most recently published payment reports or group payment reports, in each case including the underlying accounting, of a company within the meaning of sentence 2 comply with the statutory provisions including generally accepted accounting principles or other accounting standards permitted by law. 2The financial statements and reports of companies that have the Federal Republic of Germany as their home country as issuers of authorized securities within the meaning of Section 2 (1) of the German Securities Trading Act (Wertpapierhandelsgesetz) are audited;

This does not include shares in open-ended investment funds within the meaning of Section 1 (4) of the German Investment Code. 3The Panel shall examine
1. if there are concrete indications of a breach of accounting regulations,
2. at the request of the Federal Financial Supervisory Authority or 
3. without special cause (random audit). 

(4) If the company participates in an audit by the Enforcement Panel, the legal representatives of the company and the other persons used by the legal representatives in the cooperation are obliged to provide correct and complete information and to submit correct and complete documents. 
§ Section 6 WpHG aF (version valid until December 31, 2021) - Tasks and general powers of the Federal Financial Supervisory Authority

(1) The Federal Financial Supervisory Authority shall exercise supervision in accordance with the provisions of this Act. 2Within the scope of the tasks assigned to it, it shall counteract irregularities which may impair the orderly conduct of trading in financial instruments or of investment services, ancillary investment services or data provision services or which may cause considerable disadvantages for the financial market. 3 It may issue orders which are suitable and necessary to eliminate or prevent such irregularities. 
(2) The Federal Financial Supervisory Authority shall monitor compliance with the prohibitions and requirements of this Act, the ordinances issued on the basis of this Act, the European regulations listed in section 1 (1) no. 8, including the delegated acts and implementing acts of the European Commission issued on the basis of these regulations, within the scope of the responsibilities assigned to it in each case. 2It may issue orders that are suitable and necessary for their enforcement. 3In particular, it may issue public warnings on its website insofar as this is necessary for the fulfillment of its duties under this Act.
§ Section 106 WpHG aF - Audit of company financial statements and reports  
In accordance with the provisions of this section and subject to section 342b (2) sentence 3 numbers 1 and 3 of the German Commercial Code, the Federal Financial Supervisory Authority is responsible for examining whether the following financial statements and reports, including the underlying accounting, of companies for which the Federal Republic of Germany is the home state as issuers of authorized securities comply with the statutory provisions, including generally accepted accounting principles or other accounting standards permitted by law:

1. approved annual financial statements and related management reports or approved consolidated financial statements and related group management reports,
2. published condensed financial statements and related interim management reports, and
3. published payment or consolidated payment reports. 

§ Section 107 WpHG aF - Ordering an audit of financial reporting and investigative powers of the Federal Financial Supervisory Authority  
(1) The Federal Financial Supervisory Authority shall order an audit of the accounts if there are concrete indications of a breach of accounting regulations; the order shall not be issued if there is clearly no public interest in clarification 2The Federal Financial Supervisory Authority may also order an audit of the accounts without any particular reason (random audit).
(4) In conducting the audit, the Federal Financial Supervisory Authority may make use of the Enforcement Panel as well as other institutions and persons.
(5) The enterprise within the meaning of section 106, the members of its governing bodies, its employees and its auditors shall, upon request, provide information and submit documents to the supervisory authority and the persons used by the supervisory authority in the performance of its duties, insofar as this is necessary for the audit.

§ Section 108 WpHG aF - Powers of the Federal Financial Supervisory Authority in the case of recognition of an Enforcement Panel  
(1) 1If an Enforcement Panel is recognized in accordance with section 342b (1) of the German Commercial Code, spot checks shall only be carried out at the instigation of the Enforcement Panel. 2Furthermore, the Federal Financial Supervisory Authority shall only be entitled to the powers under section 107 if
1. the Enforcement Panel reports to it that a company refuses to cooperate in an examination or does not agree with the result of the examination, or
2. there are substantial doubts as to the accuracy of the Panel's findings or the proper conduct of the examination by the Panel.
(2) The Federal Financial Supervisory Authority may require the Enforcement Panel to initiate an examination under the conditions of section 107 (1) sentence 1.
§ Section 4 (4) FinDAG - Tasks and cooperation  
The Federal Financial Supervisory Authority shall perform its duties and exercise its powers only in the public interest.

Karlsruhe, January 26, 2024 
Press Office of the Federal Supreme Court
76125 Karlsruhe
Telephone (0721) 159-5013
Fax (0721) 159-5501

On 18.6.23, the MATTIL law firm submitted applications for the most important declaratory objectives with reasons to the BayrObLG. The pleading and the statement of grounds comprise approx. 800 pages and form the basis for the success of the test case. These applications are based on the declaratory objectives obtained by the law firm TILP.

13.03.2023

Start of Wirecard class action  

The Capital Investor Model Case (KAPMuG) in the Wirecard matter against Ernst & Young, Dr. Markus Braun et al. has been opened.

On March 13, 2023, the Bayerische Oberste Landgericht appointed Dipl.-Kfm. Kurt Ebert (represented by MATTIL) as the leading plaintiff in the Wirecard model proceedings pursuant to Section 9 KapMuG.

The representative of the plaintiff will be law firm MATTIL, Munich, which represents a large number of affected investors.

Law firm MATTIL has already successfully conducted several proceedings under the KApMuG, including KAP 1/07 and disposes of major experience.

The leading plaintiff acquired securities of Wirecard AG in reliance on the attestations of the defendant Ernst & Young Wirtschaftsprüfungs GmbH and the alleged success story of Wirecard AG and suffered considerable damage in the process. In the test case, all circumstances justifying a claim for damages will now be examined and uniformly decided on the basis of his case as an example.

Injured investors of Wirecard AG have six months from the publication of the decision in the Federal Gazette to file their claims in the model proceedings at affordable cost.

18.11.2020

Attention: The liquidator has indicated in the creditors meeting on 18.11. that many claims have been filed invalidly and void, when requirements of formality and reasoning were not met. A unsufficient lodging of a claim does not stop a running limitation !
Better take advice of MATTIL in order to avoid further damages.

11.09.2020

Structured products Wirecard:

Many of the victims of Wirecard are not  bond or share holders, but had purchased structured products as Bonds of other issuers with underlying Wirecard, cerificates, warrants and others.
 
Is there a way to claim compensation for these losses as well? Law Firm Mattil is convinced that we can include those claimants in our collective action against Wirecard Management, Supervisory board, EY and Moodys, maybe more responsibles. Our claim is based on a special german regulation that punishes not only a fraud committed to individuals but to the public. § 264 a STGB ( penal code ) condemns all responsible offenders to compensation for losses that have evoked from misleading prospectus, false public information etc.
 
For further questions please revert to us at any time.

25. 08. 2020

The insolvency proceeding of Wirecard AG  has been opened by the court on 25th august.

The court has set a deadline for filing your claim to 26.october.

As a shareholder you are entitled to claim your losses in this proceeding.

Your claim for compensation is based on suspect of fraud and violation of financial market information .

We offer you to submit  your claim that has to be reasoned and justified.

We expect a dividend in this proceeding , therefore we recommend this submission of your claim .

Please return the power of attorney that you have already received .

25.06.2020  

Following the shocking news of the past few days, a renewed outcry has been heard in the press: parent company Wirecard AG today filed for insolvency; according to the company, it is still being examined whether this is also necessary it's subsidiaries