This post first appeared as Blog post at FIN LAW.
If companies want to provide financial services such as investment advice or investment brokerage on a commercial scale, they need a BaFin license. BaFin warns on its website if companies offer financial services without permission. The basis for such warnings is Section 37 Paragraph 4 of the Banking Act (KWG). According to this provision, if facts justify the assumption or if it is certain that a company is conducting banking business or providing financial services without authorization, the Federal Financial Supervisory Authority can inform the public about this suspicion or finding, stating the name or company name of the company.
The mention of your real name can cause significant damage to the company’s reputation. This applies in particular to cases in which the press also reports on such an incident based on public information, thereby exposing its reach. The following article is intended to show which principles BaFin has to observe and how those affected can defend themselves if necessary.
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Anyone who provides financial services must have a BaFin license
The prerequisite for informing the public is that it is certain or there is a suspicion that a company is providing financial services illegally, i.e. operating on the market without the necessary permission from BaFin. The provision of Section 37 (4) KWG serves collective consumer protection and is intended to ensure that the public can be informed about potentially unauthorized activities at an early stage in order to keep the damage to investors and the German financial center as low as possible . What is striking is that the Federal Agency’s initial suspicion is already sufficient for publication.
BaFin may exercise its right to issue a public warning even if a company does not carry out the unauthorized activities but merely creates such an impression publicly, for example through advertising. Accordingly, the authority is not forced to first take formal action against the company and only then publish the warning. BaFin can publish its suspicions and warn the public at an early stage and before formal measures are taken. However, the company concerned must generally be heard by BaFin before the decision on publication is made.
Those affected can take action against publication
Due to the significant impact that a public warning from BaFin can have on affected companies, BaFin must observe the principle of proportionality. If it turns out that the information published by BaFin is incorrect or that the underlying circumstances were incorrectly reported, the Federal Financial Supervisory Authority must inform the public about this in the same way as it previously disclosed the information in question.
Since the publication on the website is an actual administrative action by BaFin, an action for a declaratory judgment aimed at establishing unlawful information to the public or insufficiently corrected information or a lawsuit aimed at publishing corrected information can, for example, be considered. By way of urgent legal protection, an application can be made for the issuance of an interim order, for example the deletion of certain information on the BaFin website until a decision on the main matter has been made.
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