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Relatives Are Relative

Agencies, Whistleblowing

The scandal with the Greensill Bank brings back earlier scandals by the same rating agency to mind.

How close can relationships be without being a problem for the rating and for the rating agency? What degree of kinship could influence the independence of judgment?

The story of the fund initiator Interlife Management GmbH seems like a penny dreadful: The company belonged to the father of the business scheme initiator and major shareholder of today’s Scope SE & Co. KGaA. Scope not only gave the first Interlife fund a good rating: A company owned by Scope manager Martin Passenheim took over sales. Ratings with a bitter aftertaste are not a recent phenomenon, but part of the gene code of this rating agency.

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Scope Ratings Game of Corporate Law

Agencies, Authorities, Whistleblowing

The “Scope Group” is a bunch of constant changes under company law.

As a result of the Scope Ratings GmbH billion Euro scandal about Greensill Bank in Bermen, which was rated as “investment grade” for the first time in 2019 and is now insolvent, the precise activities of this local rating agency in Berlin have gained public attention. Therefore, the background to the recent Berlin takeover of Euler Hermes Rating GmbH (EHRG) is being researched.

The world-famous brand name “Euler Hermes” was not acquired by Scope. Even back then, when Scope took over FERI EuroRating Services AG, a credit rating agency registered by the European Securities and Markets Authority (ESMA) and headquartered in Bad Homburg, on August 1, 2016, Scope did not care about continuing the good name of the acquired credit rating agency.

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References

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Whistleblowing Is Getting Popular

Read, Whistleblowing

Whistleblowers, i.e. mostly anonymous tipsters who report irregularities to supervised companies, dubious providers or market practices, have developed into an important source of information for the Austrian Financial Market Authority (FMA).

In 2020, 278 reports were submitted via the whistleblower platform on the FMA website, a new record since the system was introduced in 2014, and an increase of 57% in the past five years alone. Around nine out of ten reports prove to be relevant for supervision. Of the 245 reports that actually affected the FMA’s area of ​​responsibility, around half related to investment fraud (120) and unauthorized business operations (9), i.e. the provision of financial services requiring a license without the required authorization. Almost a third (77 reports) suspected misconduct at banks, only four concerned insurance companies and pension funds. 19 related to the securities business, 15 related to suspected money laundering.

“Our web-based whistleblower platform guarantees whistleblowers technically absolute anonymity. The information is encrypted cryptographically, so it is not possible for us or for the law enforcement authorities to technically identify the informant, “said the FMA Board of Directors, Helmut Ettl and Eduard Müller:” This creates trust and security, and is one of the main reasons why this information channel is becoming more and more popular. ”At the same time, an anonymized, equally secured mailbox enables communication between the authorities and the whistleblower, if they allow it.”

“Our whistleblower platform is such an important – often preventive – instrument in the fight against investment fraud and dubious market practices. Abuses can often be recognized early, and damage can be limited or completely prevented. It makes a valuable contribution to protecting consumers, investors and creditors,” wrote Ettl and Müller.

Two thirds of the indications of investment fraud already concern offers in connection with crypto assets and so-called virtual currencies, with sales being carried out via dubious or criminal online trading platforms on the Internet, and advertising is often via social media such as Facebook, WhatsApp, TikTok or Telegram. In addition to the distribution of fraudulent crypto assets, the criminal trade in virtual currencies continues to increase. On the dubious trading platforms are in particular financial contracts for differences (CFDs), foreign currency trading (FOREX) or binary options as well as supposedly automated trading with such alleged investment products.

The offer of binary options to small investors is prohibited in the EU, that of CFDs is severely restricted by regulations. A third of the reports of investment fraud related to fraudulent offers with traditional investment products such as stocks or gold as well as various forms of advance fraud.

Results

Whistleblower notices led to seven investor warnings, 42 reports to the public prosecutor’s office and a large number of official proceedings by the FMA as well as criminal convictions in 2020, reports FMA.