Updated: May 11, 2011 (Initial publication: Feb. 10, 2011)
Sectorial Analysis
II-6.21: Germany implements the UCITS IV directive
ENGLISH
Germany adopted a law modifying its investment legal framework in application of the UCITS IV Directive (Directive 2009/65/EC) on December 15th, 2010. This law introduces three main changes, in taxation, in the framework of micro finance funds and in the supervisory regime for investments.
FRENCH
Fiche thématique (Finance): l’Allemagne transpose la directive OPCVM IV
L’Allemagne a modifié le 15 décembre 2010 son cadre légal sur l’investissement en application de la directive OPCVM IV (Directive 2009/65/EC). La nouvelle loi introduit trois principaux changements dans le régime fiscal, le cadre légal des fonds de micro-finance et la supervision des investissements.
GERMAN
Thematischer Bericht (Finanz) : Deutschland überträgt die OGAW-IV-Richtlinie.
Deutschland hat das Investmentgesetz am 15. Dezember 2010 verändert, um es zur OGAW IV-Richtlinie (Richtlinie 2009/65/EC) gemäß zu machen. Eingeführt wurden drei Hauptveränderungen im folgenden Bereichen: Das Steuerregim und das Rechtssystem von Mikrofinanz, sowie die Investmentsaufsicht.
SPANISH
Informe temático (finanza): Alemania implementa el UCIT IV directive
Alemania adoptó una ley que modifica el marco legal de inversiones en aplicación del UCITS IV Directive (Directive 2009/65/EC) el 15 de diciembre del 2010. Esta ley introduce tres cambios substanciales, en el área de impuestos, en el marco de fondos de microfinanzas y en el régimen de supervisión de las inversiones.
PORTUGUESE
Informe temático (finanças): Alemanha dá aplicação à diretiva UCIT IV
A Alemanha adotou, em 15 de dezembro de 2010, uma lei que, ao dar aplicação à Diretiva UCITS IV (Diretiva 2009/65/EC), modifica seu marco legal de investimentos. Esta lei introduz três mudanças principais, na área de impostos, no marco legal de fundos de micro finanças e no regime de supervisão dos investimentos.
ITALIAN
Relazione tematica (Finanza): La Germania ha applicato la direttiva in material di OIVCM
Il 15 dicembre 2010, la Germania ha adottato una legge in materia di OICVM, applicando la quarta direttiva OICVM (la Direttiva 2009/65/CE). Questa legge introduce diversi cambiamenti, per quanto riguarda le imposte, in materia di fondi di micro finanza e nel controllo del regime degli investimenti.
The European Directive on investment funds (undertakings for collective investment in transferable securities – known as UCITS IV) aims at increasing the efficiency of the investment funds business as well as creating a competitive framework at the European level for such activities. The directive also includes, as part of the way to attain those objectives, special attention to increased investor protection.
Germany, as well as other Member States, had until July 1st to implement this directive. The German investment law will thus be modified in accordance with the directive. The taxation system will have to be modified as a result of the main changes introduced by the new law, so that investment funds can be classified as foreign or domestic – to provide them with a clear taxation framework.
First of all, Germany has interestingly decided to enlarge the scope of the directive to all funds, even those not directly targeted by the UCITS IV Directive, known as non-UCITS funds – such as open-ended real estate funds for example. This is justified by the Ministry of Finance by the similarity of the interests involved with any of these funds.
Second, the new law provides a lighter framework for micro finance funds, relieving them from the previously existing obligation to be established in Germany. Such a restriction on the freedom to provide services and of establishment is no longer justified in the eyes of the government, which therefore aims at increasing Germany’s attractivity for micro finance funds.
On top of that, the new law introduces several notable changes to the supervisory framework for investment funds.
The first constituent of the reform concerns investor protection: the law, in accordance with the Directive’s provisions, obliges investment companies to provide investors with a two-page document containing easy-to-understand and clear information on the main characteristics of an investment fund. Also, Germany spontaneously decided to require that investment companies, in the case of mergers or master-feeder structures provide information to the investors using durable media – letters and emails. Thus, the investors will hold important information about investment strategies and costs of funds (in the case of mergers).
Also, the cooperation between supervisory authorities is going to be enhanced by the facilitation of automatic cross-border exchange of information between authorities on the marketing of fund units. Also, a better exchange of information and the harmonization of the supervisory standards are foreseen for domestic and cross-border fund mergers. This should enable a better fluidity of the market.
In order to improve the efficiency of the European market, the UCITS IV directive and the German law also facilitate cross-border fund management, and enable cross-border master-feeder structures – which are a form of asset pooling.
Finally, the German law introduces a redress procedure for consumers, similar to the ombudsman procedure already existing for banks.
Brief commentary
The German implementation of the UCITS IV Directive therefore follows and applies the main objectives of the Directive: the improvement and facilitation of cross-border activities, especially for micro finance funds, and harmonization and better communication between supervisory authorities throughout the European Union. Such cooperation between supervisory authorities helps render the market and its observers more fluid.
Germany went a step further in the clarification of the legal framework for investment funds by including both UCITS and non-UCITS funds, thus standardizing the legal requirements for any kind of investment funds, thereby avoiding a formal boundary separating funds that can be very similar in terms of the interests involved.
Also, the Directive, and its German application, clearly identifies information as the cornerstone for market fluidity, which is the very instrument exchanged on financial markets. Once consumers obtain a sufficient level of information, their decision and market positioning on the investment fund products can become well-informed, and thus their choices more rational. Hence, the price of the market should reflect this informational fluidity, and obliging investment fund companies to inform their customer should break down informational dams. Investment fund companies will thus bear the price of their informationally favored position, by being the issuers of information that consumers will no longer have to look for for themselves.
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