Ahead of the Game on the KII

 
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There are currently two legislative proposals in Germany that aim to introduce a short, easily readable and understandable document that contains key information for investors in financial instruments: the Key Investor Information Document ("KII") under UCITS IV, and the information leaflet under the draft German Investor Protection Act.

Expedited Implementation of the KII in Germany

The first legislative proposal is based on the so-called UCITS IV Directive, which is more fully discussed in Key Investor Information Document: Friend or Foe? in this Report. The UCITS IV provisions will be implemented in amendments to the German Investment Act. The Committee of European Securities Regulators ("CESR") has agreed on the date of 1 July 2012 as the latest date for the implementation of the KII in all Member States.

The draft amendments to the German law would provide for an earlier implementation of the KII than required by the CESR agreement—UCITS set up in Germany would be required to issue a KII to investors from 1 July 2011, instead of 1 July 2012. However, this expedited requirement relates only to German funds (approved by the Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin). The draft amendments also contain a grandfathering clause for non-German UCITS admitted to public distribution in Germany prior to July 2011. These UCITS must provide the BaFin with a KII as soon as a KII is required to be produced under the rules of the relevant home state of the UCITS, and in any event by 30 June 2012.

It is unclear whether the grandfathering clause would also be applicable to UCITS currently in existence that are registered for public distribution in Germany after 1 July 2011; the draft amendments do not explicitly address this situation. In our opinion, the grandfathering provision should also be available for such UCITS, since the German Investment Act cannot require supervisory authorities in other EU countries to approve KIIs before the relevant home state rules would impose such an obligation.

The Information Leaflet Under the Draft German Investor Protection Act

Under a separate legislative initiative, the German Ministry of Finance has published a draft Act to strengthen investor protection and improve capital market efficiency. The German Investor Protection Act would introduce, among other requirements, the obligation for intermediaries deemed to be investment services firms to provide retail clients with a short and easy to...

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