Bilanzfälschung, Kurs- und Marktpreismanipulation sowie fehlerhafte Publizität: Hauptprobleme aus kriminalstrafrechtlicher Sicht

Abstract

Which role should the law, particularly criminal law, play in the regulation of today’s  financial markets? Which types of conduct can and should be prohibited and penalized?  Clearly, this is the most difficult task for lawmakers: Any “market”, after all, is a kind  of organism, and hence operates by self-regulating mechanisms, a fact which makes intervention, especially by punitive sanctions, more precarious than  in  the  more  commonly “criminal” areas such as murder, theft, and fraud. What is particularly new  is that the misdeeds in question are often crimes of gross unfairness rather than crimes  of direct harm. Insider crimes and falsification of financial statements are the most  prominent – and most recognized – examples; others are the issuance of misleading brochures, wrongful publicity, director’s dealings, and various forms of exchange and  stock price manipulation.

MAJOR TRENDSIN CURRENT LAW REFORMS

In Germany, the criminal law presently includes the crimes of falsification of financial  statements (Bilanzfälschung), market price manipulation (Marktpreismanipulation), and  wrongful publicy (fehlerhafte Publizität), partly as a result of recent statutory reforms (Viertes Finanzmarktförderungsgesetzvon 2002).With regard to the integrity of financial statements, a number of recent scandals have produced a series of wake-up calls.  Now, falsification – not only in the (classical) form of forgery, but also in various forms  of misrepresentation as well as non-compliance with regulatory governance rules – has  consequently become a new focus for criminal prosecution. Moreover, European law  obligates Germany to do away with a number of striking regulatory and enforcement  deficits. For too long, formerly existing crime statutes remained dead-letter “law on the  books” for decades. Among others, the old “accounting” crimes focussed on a narrow  set of misrepresentation scenarios which were largely limited to end-of-year financial  statements and contained mens rea requirements such as “intent to deceive the public”  that proved non-functional in practice. In the 1990s, the legislature tried to beef up  these publicity crimes, even at the price of legal certainty. Beyond the falsification of written financial statements, crimes of “misrepresentation” now encompass any conduct by which the perpetrator misrepresents or disguises “the affairs of the company”  (§§ 331 I HGB, 400 I AktG). With regard to corporations, transparency duties are no  longer limited to accounting matters: Falsehoods and window-dressing are financial crimes, too, when committed in any presentation on the financial status or on the  “affairs” of the corporation, even by way of oral presentations and other statements at  the main stockholder assembly. In sum, the old concept of “accounting crimes” has  mutated into a new concept of “transparency crimes”. At the same time, the object of  interest has undergone a dramatic shift: To publicize the truth about the current  “financial status” is no longer enough – we also expect full information on other  relevant “affairs of the person” of the company in a wider sense. As with “natural”  persons, their relationships with others are of special interest when we assess their  prospects for the future – so it is only that our commercial trade and corporation laws  define the “affairs” of the company as “including its relations with associated companies” (cf. §§ 331 HGB, 400 AktG).

The second major area where the proper extraction and definition of criminal  conduct is difficult is that of securities trade and stock exchange. Clearly, the crime of  fraud is punishable, but what about manipulations that do not fit the traditional definition of “fraud”? As early as 1896, the German “Stock Exchange Code” created a  crime called “exchange rate fraud” (§ 88 BörsG a.F.) which, however, remained dead. Nowadays, in addition to “insider” crimes which were introduced a decade ago, and  which penalize the abuse of true information, the new law also punishes stock-market  and other market-price manipulations committed by the use of untrue information, thus  replacing the old, unworkable pseudo-fraud concept by a modern manipulation concept (see, in particular, § 20a I WpHG, §§ 38 ff. WpHG). Striking features are not only its  systematic complexity and the employment  of techniques unfamiliar to criminal  doctrine, such as “safe-harbour” regulations, but also the tendency to shift more power  – including, eventually, punitive power – to the executive and their regulatory bodies,  such as the new Federal Financial Trade Oversight Office (BaFin, Bundesamt für Finanzdienstleistungsaufsicht). It is noteworthy as well that the new law even protects  financial assets in foreign markets, and applies to violations of foreign prohibitions of  similar content. This represents a remarkably new way of internationalizing municipal  criminal laws.

Third, the protection of financial markets and particularly stock exchanges today  requires compliance with rules on ad-hoc publicity. Broadly orchestrated activities by  the legislature are underway to secure transparency with regard to all activities that are  relevant for the market, as part of the new German corporate governance system. Of particular importance is the issuer’s duty to publicize “new” market-relevant facts, and  the duty of board members’ personally liable associates to publicize their “director’s  dealings” (§§ 15, 15a WpHG).

CONTENTIOUS ISSUES FROMTHE CRIMINAL LAW PERSPECTIVE

The first issue seems to be a merely doctrinal one: What are the legal interests that are  protected by financial market crimes? Is it primarily public or community interests – in  the functioning of the market, the trust in financial trade regulations, the community of  stockholders, etc.? To what extent are these criminal laws meant to protect the property interests of the individual? The answer is relevant for very practical purposes. To the  extent that the commission of a crime violates individual property interests, the disadvantaged person may claim victim status. Normally, crime victims automatically have a  cause of action in tort law, and thus are entitled to damages. Moreover, there are important procedural benefits, such as victims’ participation and discovery rights at the  investigation and trial stages. In  developing and extending those victim’s rights,  however, the lawmakers primarily had the victim of crime against the person in mind.  This, in turn, suggests that in the absence of a clear expression of legislative intent, it  remains doubtful whether such victim status benefits may be conferred on “victims” of  financial market crimes.

A second problem which is specifically virulent in the area of financial market  crimes is generated by the German constitution’s rule-of-law standards on specific  legality (Art. 103 II GG). From the viewpoint of efficiency, the diversity, changeability,  and specificity of practices in the financial markets calls for a flexible system that confers powers of quick reaction and intervention on the executive. Comitology rather than legislatory lawmaking seems best suited to do the job. In fact, the reformed German  Wertpapierhandelsgesetz (WpHG, securities and exchange code) takes a big step in  that direction. The power to define criminal practices has been shifted to a considerable degree from parliament to a special oversight agency located in the executive  branch (Bundesaufsicht für Finanzdienstleistungen, BaFin). Whether this is compatible  with rule-of-law standards is, at present, highly controversial.