Investment law – Investment | Law | Compact – Issue 4/2017

European Commission

Consultation of the EU Commission on the Activities of the European Supervisory Authorities

On March 21, 2017, the EU Commission published a consultation paper addressing the tasks and competencies of the European Supervisory Authorities (ESAs).

Among other things, the Commission is considering strengthening ESMA’s role as supervisor of the European fund industry.

The consultation can be accessed here.

National supervision

BaFin publishes new transparency standards for sales prospectuses of equity funds

As reported in various issues of last year’s “Investment Recht Kompakt”, BaFin conducted investigations into so-called “closet indexing” in 2016.

Although the regulator saw no reason to intervene in existing compensation structures, it identified potential for improvement in investor information and has now published new transparency standards.

According to this, additional information must be included in the sales prospectuses of German equity funds in the future. The sales prospectuses may be amended as part of the next upcoming amendment; however, the new content must be included in the sales prospectuses no later than December 31, 2017.

The letter from BaFin as well as the additional information required in the future can be found here.

National and European legislation

German implementation of MiFID2 progressing – also concretizations on Level 2 and 3

The current legislative period is drawing to a close and the ongoing legislative processes are in many cases “on the home stretch”. Thus, in its 228th session, the German Bundestag. At its second and third meetings on March 30, 2017, the Supervisory Board also adopted, among other things, the “Draft of a Second Act Amending Financial Market Provisions Based on European Legal Acts” (Second Financial Market Amendment Act – 2nd FiMaNoG) in the late evening (at 10:50 p.m.).

The recommended resolution and report of the Finance Committee on which the deliberations are based (BT-Drucksache 18/11775 of March 29, 2017; the document comprises 653 pages) can be found here.

As far as can be seen, only comparatively few significant changes have been made compared with the version of the government draft. For example, the new Article 3a of the legislative package contains additional amendments to the WpHG in Section 63 (n.F.) and Section 64 (n.F.).

Accordingly, a simplified “standardized information sheet” may be used for shares traded on an organized market instead of the product information sheet previously provided for. In addition, a “formalized cost report” is to be introduced as part of the new cost transparency requirements.

There have also been some recent developments at the European level. On March 31, 2017, numerous so-called Level 2 legal acts were published in the Official Journal of the EU, including the Delegated Acts relevant to investor protection (Delegated Directive (EU) 2017/593 of April 7, 2016, Delegated Regulation (EU) 2017/565 of April 25, 2016 and Delegated Regulation (EU) 2017/567 of May 18, 2016). You can find all the texts here.

Finally, ESMA has also developed a number of other activities. Among other things, it has revised its Q&A catalog on investor protection topics (“Questions and Answers on MiFID II and MiFIR investor protection topics”) and published the current version dated April 4, 2017. The additions relate to the topics of Best Execution and Inducements/Research. You can find the document here.

National supervision

BaFin announces investigation of liquidity stress tests

According to information from the BVI, BaFin intends to investigate the practical implementation of liquidity stress tests at selected investment companies.

The measure stems from the recommendations of the Financial Stability Board (FSB) on structural vulnerabilities of funds. According to this, the national supervisory authorities are to determine details on the implementation of liquidity stress tests for open-ended investment funds.

According to BVI, BaFin plans to publish a corresponding announcement in the fall of 2017.

European supervision

ESMA publishes updated Q&A on UCITS and AIFs

ESMA published updated catalogs of questions and answers on the UCITS and AIFM Directives in recent days.

UCITS Directive

ESMA clarifies that in the case of a planned cross-border provision of services (investment services, collective asset management) by UCITS management companies, also initially only the planned cross-border service as such may be mentioned in the notification letter; a precise designation of a UCITS concerning this is not required. As soon as the management company wishes to provide cross-border services with respect to a specific UCITS, it shall inform the competent authorities of the UCITS home country thereof.

AIFM Directive

The addition to the Q&A on the AIFM Directive concerns the question of whether the cross-border marketing of AIFs pursuant to Art. 32 of the AIFM Directive may also be made to the further category of investors below the professional investor (e.g. semi-professional investors pursuant to Sec. 1 (19) No. 33 KAGB) introduced in some Member States.

ESMA denies this. It is of the opinion that Article 32 of the Directive only covers distribution to professional investors within the meaning of Art. 4 para. 1(ag) of the AIFM Directive. An extension to categories of investors not covered therein, as established in other states, would not be permissible.

The supplemented Q&A on the UCITS and AIFM Directive can be found here.