“New Financial Investment Brokerage Ordinance tightens rules for independent brokers” – Independent brokers, brokers and their customers must prepare for extensive changes –
There were two major regulatory developments this year for participants in the German financial sales organisation:
On the one hand, the legislator has enacted the new Financial Investments Mediation Ordinance (FinVermV). The FinVermV transfers the rules that apply to BaFin-regulated brokers to the exceptional area of financial investment brokers in accordance with the Gewerbeordnung (GewO – German Commercial Code). Their rules are somewhat less strict than the rules for banks and asset managers who require a permit under the German Banking Act (KWG). The FinVermV was passed on 20 September 2019 and will enter into force on 1 August 2020 after a ten-month transitional period. It would be fatal, however, to postpone this issue for a long time. There is an urgent need for action, as some changes may take a long time. Among other things, the FinVermV stipulates that smaller brokers should also record and archive telephone conversations with customers in the future in order to be able to work in a legally secure manner.
Secondly, the Federal Ministry of Finance published a key issues paper shortly before the FinVermV. It confirmed the grand coalition’s plan to bring all financial intermediaries operating in accordance with the German Commercial Code under the control of the Financial Supervisory Authority BaFin and not, as before, under the control of the Chambers of Industry and Commerce. BaFin is to take over supervision from the beginning of 2021. For insurance intermediaries, the IHKs will remain responsible.
Due to our experience in implementing MiFID II, FinVermV no longer contains any surprises for us. We recommend that you check the current status of your internal compliance processes. We will then be happy to discuss the results of your audit with you or come by for a personal meeting in order to point out any mandatory adjustment requirements and possible improvements.
In addition, we advise you to regulate the retention periods in connection with telephone recordings separately with your customers, since the legally stipulated retention period of five years could not cover a possible limitation period for judicial claims and you therefore have no evidence of the consultation held at hand in the event of a judicial dispute. We would also be pleased to advise you in this context.