The case caused quite a stir in the German fund industry in the late summer of last year: Investigators from the Frankfurt public prosecutor's office searched the premises of the Union Investment fund company and arrested a top manager because he was said to have unlawfully enriched himself for months on the basis of his specialist knowledge.
When certain commercial transactions by Union Investment became apparent, the now 45-year-old man is said to have carried out private securities transactions.
He is said to have been supported by an employee of the same age at an investment bank.
In just a few months, the two accomplices brought in unlawful profits running into the millions.
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The trial against the two defendants began on Wednesday before a commercial criminal chamber at the Frankfurt Regional Court.
The public prosecutor accuses them of violating the Securities Trading Act.
In a total of 55 cases, the former manager of Union Investment and the investment bank employee are said to have illegally earned profits of more than 11 million euros last year.
As the FAZ reported last autumn, the manager in the fund company of the Volks- und Raiffeisenbanken headed one of the most important funds worth several billion euros.
Trade must be approved in advance
The trick of using the specialist knowledge to profit from future price movements on the stock exchange is illegal and is known as "front running". The basic form of insider trading is now defined in the Market Abuse Ordinance (MMVO). In front running, the perpetrator makes use of information for his own orders that he has from customer orders that have already been placed. Fund managers are allowed to conduct private securities trading, but must have this approved in advance by the compliance department.
At the start of the trial, both defendants accepted the allegations and confessed. He "completely overestimated himself", was always looking for "feelings of happiness" and was under an extremely high level of stress, said a defendant after a report by the dpa news agency. The co-defendant also admitted the insider trading alleged in the extensive indictment. The man had previously been in custody for three months and had already made a confession there. Nevertheless, the two defendants should expect a longer sentence in the event of a verdict.
Originally, the criminal proceedings should have started at the beginning of last week.
But the corona pandemic thwarted the Frankfurt criminal justice system's schedule.
According to the dpa news agency, the presiding judge of the criminal chamber had to go into quarantine.
The court has set two further procedural dates for the proceedings in the coming week.
Should further evidence be required after the confessions, the trial is likely to extend into October.
Financial supervision reports
The investigation against the then fund manager of Union Investment got the financial regulator BaFin rolling.
She had received several indications of possible insider trading in the summer.
BaFin forwarded the suspicious facts found to the public prosecutor on August 21, 2020.
Union Investment initially released the manager.
If the allegations made against him are confirmed, he "acted with considerable criminal energy," said the fund company last year.
In the meantime, both men have been fired.
After the allegations became known, there was a renewed debate about the stricter control of securities managers.Keywords: