10.03.2015 | KPMG Law Insights

Investment Law – Investment | Law | Compact – Issue 3/2015

Dear Readers,

The government and supervisory authorities have published a number of new regulations in recent weeks: Depositary Circular, Investment Regulation, Derivatives Regulation, Retail Investor Protection Act. We report on this in this issue.

In addition, another package of measures can be seen on the horizon of European regulation: The EU Commission has published a Green Paper on the creation of a Capital Markets Union.

In other respects, market participants continue to be preoccupied with MiFID 2 in the form of impact and GAP analyses. In parallel, the relevant European bodies are brooding over the final ESMA recommendations for Level 2 measures. We will keep you up to date.

With warm regards

Henning Brockhaus

National legislation

Amendment of the Investment Ordinance and the Pension Fund Capital Investment Ordinance.

On March 6, 2015, the Ordinance Amending the Investment Ordinance and the Pension Fund Investment Ordinance was published in the Federal Law Gazette and entered into force one day later.

Under the Amendment Ordinance, affected companies will be given greater opportunity to invest in infrastructure and renewable energy.

The legislator has also dropped the flat risk capital ratio of 7.5 percent for investments in non-UCITS or non-UCITS-like investment funds, which was still under discussion in the draft. There had previously been a lot of criticism for this. In the Amendment Ordinance now adopted, this ratio only applies to the extent that alternative assets are held in the acquired investment fund.

National legislation

Federal government adopts draft of the Small Investor Protection Act

On February 11, 2015, the German government submitted the draft of the Small Investor Protection Act to the Bundestag for resolution.

In parts, the draft law anticipates the provisions of MiFID 2. For example, regulations on product governance have already been integrated into the WpHG with the Small Investor Protection Act. Investment service providers are required to determine a target market at the time of product creation and to establish procedures to monitor the target market, the financial instrument and also the distribution of the financial instrument.

The rule requires close cooperation between the product manufacturer and the distributor, as the distributor is required to obtain information about the target market and the procedures to be established from the product manufacturer. In principle, capital management companies are not directly affected by this provision. However, it can be assumed that they will increasingly have to provide their sales partners with information that goes beyond the information currently published in the sales brochures.

The provisions of the Retail Investor Protection Act on product governance are to come into force on January 3, 2017, at the same time as the provisions of MiFID 2, which will then be transposed into national legislation.

The government draft of the Small Investor Protection Act can be found here.


BaFin issues depositary circular for consultation

After a lengthy exchange with representatives of depositaries, capital management companies and auditors, BaFin issued a draft circular on the tasks and duties of depositaries for consultation on February 17, 2015.

The purpose of this circular is to replace Circular 6/2010 (WA) on the Tasks and Duties of the Custodian Bank dated July 2, 2010. The circular specifies issues relating to the tasks and duties of the depositary under the KAGB and the Delegated Regulation (EU) No. 231/2013 (AIFMD Level 2 Regulation). Comments can be submitted until March 27, 2015.

The draft depositary circular can be found here.


Amendment Ordinance to the Derivatives Ordinance published in the Federal Law Gazette

The Amendment Ordinance to the Derivatives Ordinance was published in the Federal Law Gazette on March 3, 2015 and entered into force on the following day.

The amendment of the Derivatives Regulation is intended to align it with the “Guidelines on Exchange-Traded Index Funds and Other UCITS Issues” of August 8, 2014, as amended by ESMA.

The amendments relate in particular to the diversification of collateral. Accordingly, lower diversification requirements are to be applied – under certain conditions – if collateral is issued or guaranteed by sovereign issuers.

EU Commission

EU Commission publishes Green Paper on the creation of a Capital Markets Union

On February 18, 2015, the EU Commission published an EU Green Paper on the creation of a Capital Markets Union and an accompanying working document. The goal of the Capital Markets Union is to “counteract the fragmentation of financial markets, diversify sources of finance, strengthen cross-border capital flows and improve access to finance, especially for small and medium-sized enterprises.”

In the context of the creation of a Capital Markets Union, discussions include the promotion of the use of so-called European Long Term Investment Funds (ELTIFs) and a possible reduction in the regulatory-induced costs of setting up funds, licensing as fund managers and cross-border distribution of funds.

Comments on the topics/issues addressed in the Green Paper can be submitted until May 13, 2015. On this basis, the EU Commission intends to present an action plan for the Capital Markets Union in the third quarter.

You can find the EU Commission’s Green Paper here.

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Henning Brockhaus


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