30.11.2015 | KPMG Law Insights

Alternative Investments Legal – Alternative Investments Legal | Issue 10/2015

Dear Readers,

In November, shortly before the end of the year, we had two occasions to deal with more fundamental questions about fund management. This concerns the legal representation of investment fund companies as well as the scope of information obligations towards individual investors in the management of mutual funds.

In addition, since November 26, 2015, issuers of securities have had to comply with new publication, notification and transmission obligations regarding the home state under the Act Implementing the Transparency Directive Amendment Directive. BaFin has published an information sheet and a form for this purpose.

We wish you a successful and at the same time reflective Advent season.

In celebration of the year-end holidays, you can expect our next December newsletter as early as December 18, 2015.

With best regards

Dr. Ulrich Keunecke


OLG Munich: An external KVG cannot legally represent a closed-end investment limited partnership

In its judgment of October 1, 2015 (Case No.: 23 U 1570/15), the OLG Munich ruled that in the case of a closed-end investment limited partnership that has appointed an external KVG, the legal power of representation is not vested in the KVG, but in the governing bodies of the investment limited partnership. The external KVG cannot legally represent the investment fund company pursuant to § 651 ZPO.

The KVG appointed by the defendant fund company in the legal form of a GmbH & Co.KG had filed an appeal and acted as its legal representative before the Munich Higher Regional Court. The management of the closed-end investment limited partnership had not entered the lawsuit. The Munich Higher Regional Court dismissed the appeal as inadmissible due to the lack of a legal power of representation of the KVG and thus the lack of capacity to sue.

The ruling can be accessed via the Betriebs-Berater homepage, among other places.


BaFin: Unequal treatment of investors in mutual funds in the case of information on assets of KVGs not permissible

In the opinion of BaFin, it is not permissible for a KVG to provide information on the composition of portfolios and prices of individual assets to individual – but not all investors (simultaneously) – in a public investment fund.

The background to BaFin’s decision was inquiries from the insurance and banking supervisory sectors concerning, among other things, reporting obligations of insurance companies under Solvency II with regard to the composition of their invested fund portfolios as well as risk capital calculations and ongoing risk management. In the opinion of BaFin, the principle of equal treatment from § 2 para. 2 sentence 1 KAVerOV (Ordinance on the Concretization of the Rules of Conduct and Organization pursuant to the KAGB) would be jeopardized if institutional investors in mutual funds were informed earlier or more comprehensively by the KVG about the asset situation of the investment fund than private investors.

In the case of special AIFs, BaFin considers unequal treatment of investors pursuant to section 26 para. 3 KAGB in conjunction with. § 2 para. 2 KAVerOV, on the other hand, if preferential treatment of certain investors is provided for in the articles of association or partnership agreement of the AIF.

If KVGs, for example, provide banks and insurance companies with information regarding the public investment assets they manage, they must make this information available to all investors at the same time.


BaFin Guideline on Obligations for Issuers of Securities Pursuant to Section 2c of the German Securities Trading Act (WpHG)

With the entry into force of the Act Implementing the Transparency Directive Amendment Directive on 26.11.2015, issuers of securities have a publication, notification and reporting obligation regarding the home state.

BaFin has summarized details of the new publication requirement for issuers of securities pursuant to Section 2c of the German Securities Trading Act (WpHG) in an information letter. It also provides an appropriate form for notification of publication of the state of origin pursuant to § 2c para. 1 No. 2 letter a WpHG is available.

You can download the BaFin guide under this link.

The German language notification form of BaFin is available here.

For more information on the new disclosure requirement pursuant to section 2c of the WpHG, please follow this link.


Letter from the NRW Ministry of Finance to the pension funds on questions of interpretation of the AnlV

By decree dated April 2, 2015, the Ministry of Finance of North Rhine-Westphalia declared the Investment Ordinance, which was amended in March of this year, applicable to pension funds in North Rhine-Westphalia. Now, in a circular dated 10 November 2015, the NRW Ministry of Finance has issued guidelines on the interpretation issues listed in the letter.

In particular, the letter addresses questions of interpretation regarding loans under sec. 2 para. 1 No. 4c AnlV, pure loan funds, real estate investments and infrastructure investments in the form of investment assets.


Comments on the draft bill for a Financial Market Amendment Act (FimanoG)

On October 16, 2015, the German Federal Ministry of Finance (BMF) sent a draft bill for a Financial Market Amendment Act (FimanoG) to market participants and associations and asked for written comments. The FimanoG serves to implement a number of European legal acts, in particular MiFID2 and MiFIR, and also provides for amendments to the KAGB for the purpose of adapting to the PRIIPs Regulation (EU/1286/2014).

In their comments on the draft bill, the German Funds Association (BVI), the German Association for Tangible Assets and Investment Funds (bsi) and the German Banking Industry (DK) advocate, among other things, a uniform regulation on the provision of product information sheets in accordance with the KAGB and the PRIIPs Regulation for public AIFs and special AIFs.

The draft bill dated 16.10.2015 and more detailed information on this subject can be found on the BMF website.

You can find the DK statement under this link.

The position paper of the BVI can be found here.

The statement of the bsi is available under the following link.


European Parliament Adopts Commission Proposal for Greater Transparency of Securities Financing Transactions

On 29.10.2015, the European Parliament adopted the EU Regulation “on reporting and transparency of securities financing transactions” (SFT Regulation). The aim of the SFT Regulation is to make certain financial transactions more transparent and to make it easier for supervisory authorities and investors to understand the risks involved. The provisions of the Regulation also relate to AIFs and their managers and essentially have the following content:

  • The reporting of all securities financing transactions to trade repositories, with the exception of transactions with central banks. For investment funds and UCITS, the reporting obligation begins 18 months after the regulation enters into force.
  • Investment funds must provide information on the use of securities financing transactions and total return swaps in their periodic reports and pre-contractual documents; existing funds are given 18 months to amend these documents.
  • Minimum transparency requirements for collateral reuse, e.g., disclosure of associated risks and prior granting of appropriate permission. These must be applied 6 months after the regulation enters into force.

After the vote in Parliament, the regulation is expected to be formally adopted soon by the EU Council of Ministers and then published in the Official Journal of the EU.

For more information on the SFT regulation, such as press release of 29.10.2015, FAQ`s and the regulation text on which the vote is based, please follow this link.


Regulators launch joint consultation on regulatory technical standards under PRIIPs Regulation

The three European supervisory authorities EBA, EIOPA and ESMA published a joint consultation paper on 11.11.2015 on draft technical standards for the key information documents on retail investment products and unit-linked insurance under the PRIIPs Regulation (EU/1286/2014). The consultation period ends on 29.10.2016.

The consultation paper sets out details of the requirements and regulations envisaged for the Key Information Documents (KIDs). These include in particular:

  • Wording and layout of the template, as well as the treatment of multi-optional products that cannot be effectively described within the scope of three pages;
  • the so-called overall risk indicator (SRI) with seven classifications for the risks/opportunities section of the basic information sheets;
  • a methodology for allocating PRIIP investment products to the different SRI classes and for including additional explanations and warnings for certain PRIIP investment products;
  • Details on performance scenarios including a format for differentiating presentation;
  • Cost statements including the key figures to be calculated and the format to be used;
  • updating the basic information sheets on an annual basis.

To support the consultation, a public hearing will be held in Frankfurt am Main on 09.12.2015 to explain the consultation paper and the technical standards.

More information about the consultation can be found at this link.

You can find out more about the public hearing on 09.12.2015 here.

The results of the consumer tests that were incorporated into the final consultation paper are available here.

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