When a company goes public in Frankfurt, it has the choice between the Regulated Markets with its segments General Standard or the more internationally oriented Prime Standard as well as the Open Market after the IPO are regulated by the German Securities Trading Act and in the Prime Standard by the rules and regulations of the Frankfurt Stock Exchange. In the Open Market, the general terms and conditions of the Frankfurt Stock Exchange apply. Irrespective of whether an issuer is listed in Prime Standard or Scale, it is legally obliged to publish ad hoc announcements, director dealings and annual and semi-annual financial reports. The Federal Financial Supervisory Authority (BaFin) monitors whether an issuer complies with legal obligations.

For issuers in the Prime Standard, which is a prerequisite for inclusion in one of the DAX indices, quarterly reports, a corporate calendar and an annual analyst event are required on top compared to the General Standard – reports must also be provided in German and English. This makes the Prime Standard one of the segments with the highest requirements in Europe. “And yet, the rate of breaches of duty is low. Of the more than 1,200 reporting obligations in the Prime Standard, less than 2 percent are generally not met,” says Matthias Töke of Deutsche Börse.

Service providers for issuers

Together with his colleagues, he supports issuers in complying with their obligations. He recommends that issuers do not only think about this the day after the initial listing: “Even before the IPO, issuers should be aware of what obligations a listing entails and when they have to submit reports, even if the reporting is not more comprehensive than, for example, for credit financing. To this end, our team will assist the issuer before the first day of trading.”

Companies in the Scale segment must also invite analysts and investors to events and keep a financial calendar, as well as provide information for research reports that are published about them on a regular basis. Bond issuers in Scale in 2018 did not violate a single reporting obligation, i.e. the obligation to submit an annual or semi-annual report on time. “The share issuers violated 3 percent of their reporting obligations. The segment is thus fulfilling the high expectations of transparency in the capital market,” says Matthias Töke.

The employees in Töke's department are in close contact with many of the approximately 450 issuers on the Frankfurt Stock Exchange. They keep an eye on their deadlines and remind them in good time of the end of each deadline. “We see ourselves as a service provider for issuers and investors alike. That’s why, we seek for a dialogue in advance, and sometimes there are even signs of a delay. We work together with the issuers to ensure that the breach is not committed in the first place. However, if a breach does occur, we point out possible consequences to the issuer and point out possible courses of action”.

For every breach of duty, his team must initiate sanctions. In the Regulated Market this happens via the so-called Sanction Committee – this is prescribed by the Exchange Act. This independent body then imposes sanctions on issuers. As a rule, fines are imposed, but repeated serious and persistent violations can also lead to delisting.