On 29 September 2016 the German Federal Ministry of Finance published the draft bill of the second legal act to amend financial markets regulation due to European regulation (Zweites Gesetz zur Novellierung von Finanzmarktvorschriften auf Grund europäischer Rechtsakte (Zweites Finanzmarktnovellierungsgesetz –  2. FiMaNoG)) with which the German legislator first and foremost implements MiFID II into German law. In addition the 2. FiMaNoG contains implementing rules of the corresponding MiFIR as well as other European capital markets regulations, in particular Regulation (EU) 2015/2365 (Securities Financing Transaction Regulation) and Regulation (EU) 2016/1011.

The implementation leads to amendments of the German Securities Trading Act (Wertpapierhandelsgesetz (WpHG)), the German Banking Act (Kreditwesengesetz (KWG)) and the German Stock Exchange Act (Börsengesetz (BörsG)). In addition, amendments will be made in the German Insurance Supervision Act (Versicherungsaufsichtsgesetz (VAG)) and the German Capital Investment Act (Kapitalanlagegesetzbuch (KAGB)) as well as in several implementing regulations.

Amendment of the German Securities Trading Act (WpHG)

The WpHG will be amended significantly. Not only will it be structured differently, content amendments will be substantive. In particular obligations relating to conduct and organization are affected. They will change fundamentally in order to secure and strengthen investor protection. Some of the regulations go beyond what MiFID II requires, such as rules on the structuring of sales guidelines with respect to conflicts of interest. Also as regards product information sheets the German legislator takes a special path: although on an EU level not explicitly provided for, 2. FiMaNoG still requires product information sheets for plain vanilla financial products, such as Dax shares or government bonds. Other provisions are still not in line with MiFID II such as the prohibition to use certain records for other than documentary purposes.

Some concepts introduced by MiFID II are not unknown to the German legal system. For instance, MiFID II distinguishes independent from dependent investment advice. In Germany the category of independent fee based investment advice already exists and is regulated in the German Fee Based Investment Advice Act (Honoraranlageberatungsgesetz) and is also mentioned in the German WpHG. Therefore, the concept will just be aligned with the requirements of MiFID II. At present, the draft-rules for an independent investment advisor provide for a strict prohibition for the acceptance of inducements even if the investment advisor plans on distributing them to the client. As a result the investment advisor would be obliged to assess whether there is another appropriate financial instrument available for the client without inducements which is not required by MiFID II and not required from an investor protection perspective, especially taking into account that a portfolio manager is allowed to receive inducements provided that he distributes them to the client.

Also the 2. FiMaNoG specifies under which conditions the acceptance of provisions shall be permitted. This shall, inter alia, be the case if the service provider has built up an extensive network of branches to ensure easy access to financial advice for their clients.

Change of supervisory regime for third country firms

It is also noteworthy that the supervisory regime for third country investment firms will change: contrary to the existing regulation certain provisions of the WpHG will not be declared inapplicable for third country investment firms but rather the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) will be authorized to not apply certain provisions of the WpHG to third country investment firms who provide their service to German customers on a cross-border basis, provided the third country investment firm is subject to a sufficient home country supervision. This means that generally conduct of business provisions are applicable to third country investment firms who provide their services on a cross-border basis as long as BaFin has not exempted them from the applicability of these rules.

Extended supervision and intervention powers of the regulatory authority

The 2. FiMaNoG will also improve supervision and intervention powers of the regulatory authority. Moreover, it will unify and intensify sanctions by extending the catalogue of administrative offenses and the range of fines within the WpHG, KWG, BörsG, KAGB and VAG. The current draft of the 2. FiMaNoG provides that it is an offence if an investment firm intentionally or frivolously. In addition, a requirement to generally publish measurements and sanctions by BaFin will be introduced.


At this time the 2. FiMaNoG is still in a consultation phase. The most important interest groups of the financial sector have published their position on the draft bill and it remains to be seen whether the German legislator will make changes to the current draft. In any case, the new rules will come into force at 3 January 2018.