Saturday, 24 October 2015

Private investor protection in Germany

The  Private Investor Protection Act (Kleinanlegerschutzgesetz) of 3rd July 2015 reinforces private investors protection when they  invest in products and  instruments outside regulated markets.

The new act
  • widens the scope of information to be included in  sales prospectuses (Verkaufsprospekt) for instruments regulated by the German Capital Investment Act (Vermögensanlagegesetz), such as non-securities and non-fund investments,
  • introduces a prospectus requirement for the marketing of subordinated loans (Nachrangdarlehen) and profit-participating loans (partiarisches Darlehen) to the public, with an exception made for internet crowd-funding up to a value of €2.5 million, 
  •  introduces a minimum term of an investment product of 24 months, 
  •  sets a maximum validity of the sales prospectus of 12 months, 
  •  creates a much stricter regulation of the (public) advertising of the investments in assets and  an obligation of  issuers to draft annual financial statements (if not already required by other laws). 
  •  expands BaFin´s power to intervene in market practice through the possibility of "shaming" (ie making public a breach due to marketing an offer without having published a sales prospectus in advance), as well as an extended authorisation for BaFin to examine an offeror´s financial accounting.