GERMANY Law and Practice Contributed by: Amos Veith, Jens Steinmüller, Ronald Buge and Stephan Schade, POELLATH
3.4 Operational Requirements Germany offers different types of retail funds – eg, UCITS, real estate funds, funds of hedge funds, closed-end funds and infrastructure funds. The fund types are based on the UCITS investment and borrowing restrictions as the default rules. The investment and borrowing restrictions are then modified to fit each fund type. The KAGB contains a catalogue of assets in which a closed-end Public AIF may invest. The investment in other funds by a closed-end Public AIF is restricted (ie, the structuring of a fund of funds or feeder fund as a retail fund). For a further overview, see 2.4 Operational Requirements . 3.5 Fund Finance The explanations given in 2.5 Fund Finance (regarding alternative investment funds) also apply to fund finance for retail funds. 3.6 Tax Regime German tax law does not provide for a specif - ic tax regime applying to funds targeting retail investors. However, for taxation at investor level, different tax rules apply to institutional corpo - rate investors and retail individual investors. The rules for retail individual investors are as follows. Funds Organised as Partnerships Domestic funds eligible for non-trading treatment Resident retail individual investors A resident retail individual investor’s alloca - ble share of interest, dividends, capital gains relating to debt instruments and equity capital gains of shareholdings representing an indirect interest of less than 1% are subject to German income tax at a flat rate of approximately 26.4% (including solidarity surcharge) plus church tax, if
agers have been subject to similar requirements on the content of their marketing materials as MiFID firms. 3.3.7 Marketing of Retail Funds Retail funds can be marketed to any investor in Germany (regardless of whether the investor is professional, semi-professional or retail). 3.3.8 Marketing Authorisation/Notification Process The marketing of alternative funds or UCITS to retail investors requires either an authorisation by BaFin or, with respect to UCITS, a European marketing passport under the UCITS Directive. 3.3.9 Post-Marketing Ongoing Requirements There are annual and semi-annual reporting requirements for managers of retail funds. The reports need to be published. Furthermore, the redemption price must be published as well as any disclosures made in the home country of such manager. 3.3.10 Investor Protection Rules In addition to that which was previously dis - cussed in 2.3.10 Investor Protection Rules , civil law prospectus liability rules offer effective protection for retail investors. Basically, civil law prospectus rules impose a liability on the man - ager and initiator of the fund. The measuring stick is whether the prospectus is incomplete or misleading in aspects that are material for the investment decision of a typical investor. 3.3.11 Approach of the Regulator As noted in 2.3.11 Approach of the Regulator , BaFin is generally co-operative and open to dis - cussions.
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