BaFin opinion regarding discretionary portfolio managers

On 20 March 2015, the German Federal Financial Supervisory Authority ("Bundesanstalt für Finanzdienstleistungsaufsicht" (BaFin)) published an amended version of its FAQ. This covers several questions with respect to the marketing and distribution of funds in Germany and the corresponding information requirements for investors.

According to BaFin, the purchase of fund-units (UCITS and AIFs) by discretionary portfolio managers involves the marketing of that fund in Germany. BaFin regards the portfolio manager as placing the units with their client. This therefore triggers a requirement for the fund to register in Germany.

Potential need for non-German funds to register in Germany

Consequently, non-German investment companies (AIFMs and UCITS-management companies) might have to review their approach to the German market to avoid registration requirements. However, the mere acceptance of a direct order from a German investor does not involve the marketing of the fund in Germany.

KIID/KID requirements

Furthermore, BaFin has stated that the investor may not forgo the requirement to be provided with a fund's KIID/KID by the distributing entity, regardless of whether the client is receiving investment advice or just placing an order. There are only exceptions in cases where the marketing entity may not provide its client with KIID/KID e.g. the client places the order via e-mail or per fax.

The full wording of the new FAQ can be found (in German) here.