BaFin

Topic Authorisation requirements Information sheet

Date: 11.12.2017

Information sheet for the participants and members of German stock exchanges regarding the authorisation requirement for proprietary business and the application of § 64x (8) sentence 1 of the German Banking Act (Kreditwesengesetz – KWG) from 3 January 2018 onwards (previously § 64v (8) sentence 1 of the KWG (new version ))

Reason:

With the entry into force of the Second German Act Amending Financial Markets Regulations (Zweites Finanzmarktnovellierungsgesetz – 2nd FiMaNoG) on 3 January 2018, a separate authorisation will be required pursuant to § 32 (1a) sentence 2 of the KWG by anyone who, inter alia as a participant or member of a stock exchange, a multilateral trading facility or other trading venue, conducts proprietary business, i.e. trades financial instruments in one's own name and on one's own account without providing any service to a third party in doing so. It is only in a few exceptional cases which are subject narrow legal definitions that the law does not impose the authorisation requirement pursuant to § 32 (1a) sentence 3 of the KWG.

In addition to German companies, the new rule will also affect foreign companies from both the EEA and third countries that wish to conduct operations in Germany by providing cross-border services. Pursuant to the transitional provision of § 64x (8) sentence 1 of the KWG, the third-country companies affected are considered – temporarily – exempt from the authorisation requirement if they submit an application for exemption pursuant to § 2 (5) of the KWG (new version) by 2 July 2018.

Using the transitional provision of § 64x (8) sentence 1 of the KWG:

The transnational legal provision requires that the company concerned submit a complete application for exemption to BaFin by 2 July 2018. The administrative practice for applications for exemption from the authorisation requirement pursuant to the KWG by third-country companies was published by BaFin in its "Notes regarding the licensing for conducting cross-border banking business and/or providing cross-border financial services" (Merkblatt zur Erlaubnispflicht von grenzüberschreitend betriebenen Geschäften) of 1 April 2005. On 13 September 2017, BaFin published a supplement to the aforementioned Notes of 1 April 2005 solely concerning the application of § 64x (8) sentence 1 of the KWG (new version) (still referred to there as § 64v (8) sentence 1 of the KWG) to the effect that it is not necessary to submit a certificate from the home supervisor in order for the application documentation to be deemed complete within the meaning of the transitional provision.

At least the following documents must be submitted in order for an application to be deemed complete within the meaning of the transitional provision:

  • informal application in German with reference to § 64x (8) sentence 1 of the KWG naming the company to be exempted;
  • detailed description of the business activities of the company to be exempted, of how it is affected (participant/member of a stock exchange, electronic access, multilateral trading facility, trading venue) and of what activities it conducts on which stock exchanges/trading venues;
  • name of the home supervisor and type of supervision, where applicable;
  • copy of partnership agreement/articles of association;
  • evidence of registration if registration has taken place;
  • current annual financial statements, including all related documentation;
  • details about the applicant or about each management board member of the applicant company ( see "Statement of no prior or pending convictions" form (Straffreiheitserklärung));
  • declaration by the applicant or by each management board member of the applicant company as to whether or not criminal proceedings are pending against them, whether they have been subjected to criminal proceedings due to a crime or offence, as well as whether or they or any company under their management is or has ever been involved as debtor in insolvency proceedings or proceedings surrounding the filing of an affidavit of insolvency or other comparable proceedings (statement of no prior or pending convictions (Straffreiheitserklärung));
  • (sample) contract forms that are intended for use for the planned business activities in Germany;
  • appointment of a German receiving agent.

Single original copies of these documents must be submitted in their entirety and in paper form by 2 July 2018 (receipt by BaFin) and must be addressed as follows:

Bundesanstalt für Finanzdienstleistungsaufsicht
Referat EVG 5
Graurheindorfer Straße 108
53117 Bonn

Subject:
Application for exemption pursuant to § 64x (8) sentence 1 of the KWG

Furthermore, the relevant German trading venue must be informed about the submission of the application.

After the documents have been received, the applicant will receive a confirmation of receipt and a brief notification as to whether the documents are deemed complete within the meaning of § 64x (8) sentence 1 of the KWG (new version). However, § 64x (8) sentence 1 of the KWG (new version) does not enter into force until 3 January 2018. Therefore, it is only after this date that BaFin will send out letters of confirmation stating whether the company has been deemed exempt within the context of the transitional provision of § 64x (8) sentence 1 of the KWG (new version) until a final decision is made.

If no complete application (within the meaning of the supplement to the Notes) for exemption for a company subject to the proprietary business authorisation requirement has been received by 2 July 2018, the company may no longer make use of the transitional provision.

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