ESMA Opens Probe Into Germany’s Wirecard Response

Source: Regulation Asia Editors, Regulation Asia 2020-07-20

ESMA’s fast track assessment will focus on whether BaFin and accounting watchdog FREP properly applied European guidelines on enforcing the reporting of financial information.

ESMA (European Securities and Markets Authority) is launching a formal assessment of the German supervisory response to the events leading to the collapse of Wirecard.

“High quality financial reporting is core to investor trust in capital markets and Wirecard’s collapse has undermined this trust,” ESMA said in a statement. “Therefore, it is necessary to assess these events to help in restoring investor confidence.”

German regulator BaFin has been under fire for failing to properly respond to multiple red flags indicating accounting fraud at Wirecard last year. Last month, European Commission executive vice president Valdis Dombrovskis asked ESMA to conduct a fact-finding analysis of the events leading up to the Wirecard collapse and report back by 15 July.

ESMA’s assessment will focus on whether BaFin and accounting watchdog FREP (Financial Reporting Enforcement Panel) properly applied European guidelines on enforcing the reporting of financial information.

The 2014 guidelines – the GLEFI (Guidelines on the Enforcement of Financial Information) – were designed to be used by all competent authorities in EU member states to ensure that financial information provided by issuers comply with requirements of the EU Transparency Directive.

The assessment will be fast-tracked using ESMA’s peer review methodology, and is scheduled to be concluded by 30 October.

ESMA is also making publicly available a 2017 review of Germany’s adoption of the GLEFI, in view of the “overriding public interest in this particular case”.

The 2017 report identified some shortcomings at BaFin, including a “legalistic approach” to accounting issues. “BaFin has a higher threshold than other enforcers when identifying infringements and thus might be reluctant to take a decision about a misstatement if there is a risk that a court might decide otherwise,” the report says.

The report had invited BaFin and the European Commission to analyse whether the Transparency Directive was correctly transposed by Germany, given BaFin’s self-reported “inability to comply with the guidelines due to a lack of enforcement powers”.

ESMA

FREP

ESMA Opens Probe Into Germany’s Wirecard Response

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