The 149g Law: Enforcing German Financial Reporting

Germany’s capital markets are reinforced by a legal framework designed to ensure transparency for investors. Regulations within the German Securities Trading Act (Wertpapierhandelsgesetz or WpHG) establish a system of mandatory disclosure for entities participating in the nation’s public markets. The core purpose is to provide all market participants with consistent and reliable information, allowing for informed investment decisions.

The German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht), or BaFin, is the regulatory body tasked with overseeing compliance. Its enforcement powers are a direct mechanism to uphold market confidence by ensuring that the financial health of publicly traded companies is not hidden from public view.

Entities Subject to Publication Duties

Financial reporting obligations apply specifically to entities defined under the WpHG as “domestic issuers” (Inlandsemittent). An entity qualifies as a domestic issuer if its home country is Germany and its securities are admitted to trading on a regulated market within Germany or another European Union member state. The definition also captures issuers whose home country is another EU member state but whose securities are admitted to trading exclusively on a regulated market in Germany.

A “regulated market” (regulierter Markt) is a specific legal term for a multilateral system, like the Frankfurt Stock Exchange, that operates under authorization and transparency requirements. It is important to distinguish these official markets from “regulated unofficial markets” (Freiverkehr), such as the Open Market in Frankfurt. Companies whose securities trade only on these less-regulated segments are not subject to the same financial reporting duties.

The law focuses on the location of the market and the issuer’s designated “home country” to determine applicability. This makes the choice of listing venue a decision with significant regulatory consequences.

Mandatory Financial Reporting Obligations

Companies subject to these rules face precise requirements for what must be published and when. The two primary documents are the annual financial report and the half-yearly financial report, which provide the market with a view of a company’s financial position and performance.

The annual financial report must be made publicly available no later than four months after the conclusion of the company’s financial year. This report is comprehensive, required to include audited financial statements, a detailed management report discussing the company’s performance and outlook, and a responsibility statement from management affirming the accuracy of the information. For companies required to produce consolidated accounts, these group-level reports are also part of the mandatory disclosure.

The half-yearly financial report provides a mid-year update and must be published within three months after the end of the first six-month period of the financial year. This report includes a condensed set of financial statements and an interim management report. For both reports, publication involves making the documents available on the company’s website and transmitting them to the official Company Register (Unternehmensregister).

Enforcement and Public Naming Procedure

When a company fails to meet its publication deadlines, BaFin initiates a defined enforcement process. Since the implementation of the Financial Market Integrity Strengthening Act (Finanzmarktintegritätsstärkungsgesetz – FISG) in 2021, BaFin has sole responsibility for this enforcement. The authority actively monitors for compliance and can begin proceedings as soon as a deadline is missed.

The first step for BaFin is to formally determine that a violation of the WpHG has occurred based on whether the required financial report was published in time. Once a failure is confirmed, BaFin’s primary enforcement tool is the public announcement of the company’s non-compliance.

This procedure is often referred to as “naming and shaming.” BaFin will publish a notice on its official website that clearly identifies the issuer by name and specifies the nature of the violation. This public disclosure serves to alert investors and the broader market to the company’s lapse in transparency and acts as an incentive for compliance.

Monetary Fines and Remedial Publication

Failing to publish financial reports on time constitutes an administrative offense (Ordnungswidrigkeit), which empowers BaFin to impose monetary fines. These fines serve as a direct financial deterrent against non-compliance and reinforce the seriousness of the reporting obligations.

For a legal entity, such as a corporation, BaFin can levy penalties of up to €10 million or 5% of the company’s total annual revenue from the preceding year, whichever amount is higher. Fines can also be imposed directly on individuals in management positions who are deemed responsible for the violation, with potential penalties reaching up to €2 million.

A company that has failed to meet its obligations can take steps to remedy the violation, a concept known in German law as “Heilung” or healing. This is achieved by subsequently publishing the overdue financial report. While this remedial action is a necessary step, it does not automatically nullify the administrative offense, but it can be a mitigating factor considered during the sanctioning process.