BaFin said last year that it found deficiencies in the brokerage's organization and management, and conducted a special audit of the firm.。

The regulator provided Flatex in November with a report containing its findings, which included raising capital requirements to ensure there was sufficient funding to deal with any significant market volatility or possible margin call notices.。

BaFin issued a public statement this week on other actions it has taken against the broker, with regulators fining Flatex and ordering the broker to tighten its procedural and management controls.。

BaFin takes action against flatex DEGIRO

BaFin has taken several measures against the broker, including a €1.05 million fine and a mandatory €50 million increase in the broker's capital requirements.。

BaFin has forced the broker to expand its capital buffer to a level it believes is appropriate for the volume of business FlatexDEGIRO is undertaking.。The increased €50 million capital requirement will remain in place until Flatex can demonstrate that the vulnerabilities found by BaFin have been corrected.。

BaFin said the company's risk management, internal control systems, regulatory reporting and anti-money laundering procedures were flawed.。The German regulator will also appoint a special representative to assist and closely monitor the progress of the brokerage reform, rather than waiting for a year or two to re-examine the business.。

Flatex needs to change its operating model

According to analysts at U.S. investment bank Jefferies, FlatexDEGIRO is expected to have to hire an additional 100 full-time employees to meet BaFin's expectations, which the company expects will be 7 percent a year..Between 0 and 10 million euros。

When FlatexDEGIRO released BaFin's findings in December 2022, the company's shares fell -33%.。Some analysts saw this as an overreaction and the broker moved quickly to appoint new members to the management committee as well as a dedicated chief risk officer.。

It is understood that the company does not need to raise any new cash to comply with the regulator's rules, although the regulator may prevent the broker from paying its first dividend this year.。

Flatex's problems have been described by some in the market as a "period of pain," but the broker has underperformed in several key areas, including risk management and anti-money laundering controls, a core function of all financial services brokerages.。

Flatex appears to be taking corrective action, but it remains to be seen how quickly it can recruit the right new staff and implement improved procedures.。It would be better if the company could recognize its shortcomings and remedy them internally in a timely manner without the need for regulatory intervention。