Conflicts of interest; Authorisation to issue statutory instruments

(1) A capital management company must take all reasonable steps to identify conflicts of interest that arise in connection with the management of investment funds between
1. the capital management company, and its executives, employees, or any other person directly or indirectly linked to the capital management company by a control relationship, and the investment fund it manages or the investors in that investment fund,
2. the investment fund or the investors in that investment fund and another investment fund or the investors in that other investment fund,
3. the investment fund or the investors in that investment fund and another client of the capital management company,
4. two clients of the capital management company.
(2) A capital management company must establish and maintain effective organisational and administrative arrangements that make it possible to take all reasonable steps to identify, prevent, resolve, and monitor conflicts of interest, in order to prevent conflicts of interest from harming the interests of the investment funds and their investors.
(3) Within their own operating procedures, AIF capital management companies must segregate tasks and areas of responsibility that could be regarded as incompatible with one another, or that could potentially give rise to systematic conflicts of interest. AIF capital management companies must assess whether the conditions of the conduct of their activity could give rise to other material conflicts of interest, and must disclose these to the investors in the AIFs.
(4) Where the organisational arrangements made by the AIF capital management company to identify, prevent, resolve, and monitor conflicts of interest are not sufficient to ensure, with reasonable confidence, that the risk of damage to investors' interests is avoided, the AIF capital management company must, before undertaking business on their behalf, clearly inform the investors of the general nature or sources of the conflicts of interest, and must develop appropriate policies and procedures.
(4a) Where a capital management company manages, or intends to manage, an investment fund on the initiative of a third party,
1. an AIF capital management company must submit to the Federal Institute detailed explanations and evidence, having regard to any conflicts of interest, of its compliance with the requirements of subsections (1) to (4),
2. a UCITS capital management company must submit to the Federal Institute detailed explanations and evidence, having regard to any conflicts of interest, of its compliance with the requirements of subsections (1) and (2). The capital management company must, in particular, set out what reasonable steps it has taken to prevent conflicts of interest arising from the relationship with the third party or, where these conflicts cannot be prevented, how it identifies, manages, monitors, and, where appropriate, discloses these conflicts of interest, so that they do not damage the interests of the investment fund and its investors. The first and second sentences also apply to cases in which the investment fund uses the name of a third party acting as initiator, or in which a capital management company appoints a third party acting as initiator as an outsourcing undertaking under section 36(1).
(5) For AIF capital management companies, the types of conflicts of interest named in subsection (1), and the reasonable measures that an AIF capital management company is expected to take, as regards structures and organisational and administrative procedures, to identify, prevent, manage, monitor, and disclose conflicts of interest, are governed by Articles 30 to 37 of Delegated Regulation (EU) No 231/2013.
(6) The Federal Ministry of Finance is authorised to issue, by statutory instrument not requiring the consent of the Bundesrat, for capital management companies, in respect of retail AIFs, additional provisions supplementing the measures and procedures named in subsection (5) set out in Articles 30 to 37 of Delegated Regulation (EU) No 231/2013, and, in respect of UCITS, more detailed provisions on
1. the measures such a capital management company must take to
a) identify, prevent, manage, and disclose conflicts of interest, and
b) establish suitable criteria for distinguishing the types of conflicts of interest that could harm the interests of the investment fund, and
2. the structures and organisational requirements necessary to reduce conflicts of interest under subsection (1). The Federal Ministry of Finance may transfer this authorisation, by statutory instrument, to the Federal Institute.