BaFin Publishes Guidance on Transparency Standards for German Funds

On 4 April 2017, BaFin has published new transparency standards for funds after a BaFin investigation found that some active funds “closely” track their indices.

Last year, the BaFin had investigated into 290 UCITS-compliant active equity funds with a minimum of €10m in assets that are at least 51 per cent invested in equities (so-called closet trackers) and identified some products that “closely” follow their benchmarks while being marketed as active products.

BaFin’s proposals for the new transparency rules, which were first announced in late December, were under consultation until the end of January. The BaFin has now published a final version of its transparency standards for German fund manager’s fund documents.

The rules will not only apply to active funds that are at least 51 per cent invested in equities but will also apply to products that have a “noticeable investment focus on equities”. The new rules will apply from January 2018 onwards and the funds in question will be required to disclose explicitly to investors whether they are actively managed or merely track an index. German fund managers will also have to describe the fund's investment strategy and explain if and to what extent the fund selects stocks as part of an active management process.

If a fund manager has set guidelines for how much the fund can deviate from the performance of its benchmark in order to control risk, then this information has to be included in sales documents for investors. Fund prospectuses will have to include a chart of the fund's long-term performance in relation to its benchmark. This information will be required to cover a 10-year period, except for newer funds.

The new transparency standards are available (in German only)

 

BaFin: Delay of Revised Remuneration Ordinance for Credit Institutions

On 28 March 2017 BaFin announced that the revised remuneration ordinance for credit institutions (Institutsvergütungsverordnung) will probably become effective in the second quarter of 2017. BaFin strives to keep the delay as brief as possible and will preferably publish an interpretative guidance to the ordinance at the same time.

The draft updated remuneration ordinance for credit instituions is available (in German only)

 

BaFin Publishes Guidance for Insurers Regarding Sovereign Risk

On 7 April 2017, BaFin has published an interpretative note on how insurers under the Solvency II regime should assess the credit risks of sovereign bonds or loans to sovereign issuers in their internal risk management guidelines. According to BaFin, for the purpose of identifying sovereign risks, the legal, political, economic and financial situation of the debtor, relevant economic indicators as well as their past and/or forecasted developments, the deficit and debt ratios of a country, the competitiveness of the country, the labor market situation and inflation are to be considered. An analysis of the stability of the government and of the legal and financial system, as well as the rights and obligations associated with membership in international organizations can also be used. The interpretative guidance does not apply to fund management companies, even if they manage funds for insurance companies.

The interpretative guidance is available (in German only)

BaFin Publishes Additional Guidelines Regarding Administrative Fines

On 22 February 2017, the BaFin published additional guidelines for its administrative fines which supplement the guidelines published in November 2013. The document includes guidelines for administrative fines to be imposed in accordance with the Securities Trading Act (Wertpapierhandelsgesetz – “WpHG”) for violations of ad hoc notification obligations, violations of notification obligations regarding significant holdings of voting rights and breaches of financial reporting rules.

The guidelines are available (in German only)

Investment Statistics as of 28 February 2017

In April 2017, the German Investment Fund Association BVI has issued its latest investment statistics report dated February 2017, providing an overview of the net assets and net sales within the German investment fund and asset management markets. The statistics are broken down by asset class and provider. They provide information on net assets and net inflows of investment funds and assets outside investment funds.

The latest statistics are available