Outsourcing; Authorisation to issue statutory instruments

(1) The capital management company may outsource tasks under section 1(19), point 24, or the services and ancillary services under section 20(2), first sentence, points 1 to 3 and 8 to 10, and subsection (3), first sentence, points 2 to 5 and 9 to 11, to another undertaking (outsourcing undertaking) under the following conditions:
1. the capital management company must be able to justify its entire outsourcing structure on objective grounds;
2. the outsourcing undertaking must have sufficient resources to perform the tasks and services and ancillary services delegated to it, and the persons who actually direct the business of the outsourcing undertaking must be reliable and have sufficient experience;
3. insofar as the outsourcing concerns portfolio management in the case of a UCITS capital management company, and portfolio management or risk management in the case of an AIF capital management company, only outsourcing undertakings that are authorised or registered for the purposes of asset management or financial portfolio management and that are subject to supervision may be engaged for this; section 2(6), first sentence, point 5, of the Banking Act does not apply in this respect; where this condition cannot be satisfied in the case of AIF capital management companies, outsourcing may take place following approval by the Federal Institute;
4. where portfolio management or risk management is outsourced to an undertaking with its seat in a third country, cooperation between the Federal Institute and the competent supervisory authority of the third country must be ensured;
5. the outsourcing may not impair the effectiveness of the supervision of the capital management company; in particular, it may neither prevent the capital management company from acting in the interest of its investors, nor prevent the investment fund from being managed in the interest of the investors;
6. the capital management company must be able to demonstrate that the outsourcing undertaking
a) has the necessary qualifications, having regard to the tasks and services and ancillary services delegated to it,
b) is capable of properly performing the tasks and services and ancillary services assumed, and
c) was carefully selected;
7. the capital management company must be able to effectively monitor the outsourced tasks and services and ancillary services at all times, and to ensure that the performance of the delegated tasks and the provision of the delegated services and ancillary services, irrespective of the regulatory status and location of the outsourcing or sub-outsourcing undertaking, comply with Directive 2009/65/EC in the case of UCITS capital management companies, and with Directive 2011/61/EU in the case of AIF capital management companies; the capital management company must in particular contractually secure the necessary instruction rights and rights of termination; furthermore, in the case of outsourcing to an undertaking in a third country, it must contractually ensure that the outsourcing undertaking appoints a domestic agent for service, to whom notifications and service of documents by the Federal Institute can be effected, and
8. the capital management company continuously reviews the services provided by the outsourcing undertaking. The Federal Institute's approval of the outsourcing under the first sentence, point 3, must be granted within a period of four weeks after receipt of the application for approval, where the conditions for approval are satisfied. Where the conditions for approval are not satisfied, the Federal Institute must inform the applicant of this within the period under the second sentence, stating the grounds, and must request any missing or amended particulars or documents. The period named in the second sentence begins to run again upon receipt of the requested particulars or documents.
(1a) Irrespective of distribution agreements between a capital management company and a distribution body, this section does not apply in cases in which
1. the distribution function named in Annex II, third indent, of Directive 2009/65/EC, or in Annex I, point 2, letter b, of Directive 2011/61/EU, is performed by one or more distribution bodies acting in their own name, and
2. the investment funds are marketed in accordance with Directive 2014/65/EU or through insurance-based investment products under Directive (EU) 2016/97.
(2) The capital management company must notify the Federal Institute of an outsourcing before the outsourcing agreement takes effect. It must further notify the Federal Institute of material changes to an outsourcing.
(3) Portfolio management or risk management may not be outsourced to
1. the depositary or a sub-custodian, or
2. another undertaking whose interests could conflict with those of the capital management company or the investors in the investment fund, unless such an undertaking
a) segregates the performance of its portfolio management or risk management tasks, functionally and hierarchically, from its other tasks that could potentially conflict with them, and
b) properly identifies, manages, monitors, and discloses to the investors of the investment fund the potential conflicts of interest.
(4) The capital management company is liable for fault on the part of the outsourcing undertaking to the same extent as for its own fault.
(5) The capital management company may not delegate tasks and services and ancillary services under subsection (1), first sentence, to an extent that results in it no longer being regarded as a management company, or as a provider of the services and ancillary services named in subsection (1), first sentence, and becoming a letter-box entity.
(5a) The Federal Institute may, in individual cases, make orders directly against outsourcing undertakings that are suitable and necessary to ensure the proper conduct of the activity of the capital management company, in particular to prevent the capital management company from becoming a letter-box entity within the meaning of subsection (5).
(6) The outsourcing undertaking may further delegate the tasks and services and ancillary services delegated to it under subsection (1), first sentence, under the following conditions (sub-outsourcing):
1. the capital management company must give its prior consent to the sub-outsourcing,
2. the capital management company must notify the Federal Institute of the sub-outsourcing before the sub-outsourcing agreement takes effect,
3. the conditions laid down in subsection (1), points 2 to 8, apply correspondingly to the relationship between the outsourcing undertaking and the sub-outsourcing undertaking. The first sentence applies correspondingly to every further sub-outsourcing.
(7) Subsection (3) applies correspondingly to every sub-outsourcing of portfolio management or risk management.
(8) For UCITS capital management companies, the outsourcing must be consistent with the guidelines regularly set by the UCITS capital management company for the allocation of investments.
(9) The capital management company must list, in the sales prospectus under section 165 or section 269, the tasks and services and ancillary services under subsection (1), first sentence, that it has outsourced.
(10) For AIF capital management companies, the conditions for satisfying the requirements under subsections (1) to (3), (6), and (7), and the circumstances under which the AIF capital management company is deemed, within the meaning of subsection (5), to have delegated its functions to an extent that turns it into a letter-box entity, such that it can no longer be regarded as the manager of the AIF, are governed by Articles 75 to 82 of Delegated Regulation (EU) No 231/2013. For UCITS capital management companies, Articles 75 to 82 of Delegated Regulation (EU) No 231/2013 apply correspondingly as to the conditions for satisfying the requirements under subsections (1) to (3), (6), and (7), and the circumstances under which the UCITS capital management company is deemed, within the meaning of subsection (5), to have delegated its functions to an extent that turns it into a letter-box entity, such that it can no longer be regarded as the manager of the UCITS.
(11) The Federal Ministry of Finance is authorised to issue, by statutory instrument not requiring the consent of the Bundesrat, more detailed provisions on
1. the nature, extent, timing, and form of the notifications provided for under subsections (2) and (6), first sentence, point 2, and the documents to be submitted,
2. the permissible data media, transmission channels, and data formats, and
3. additional information to be used and notified in addition to the principal information, such as special legal entity identifiers and particulars of their currency or validity. The Federal Ministry of Finance is further authorised to issue, by statutory instrument not requiring the consent of the Bundesrat, provisions supplementing the existing notification obligations with an obligation to prepare consolidated notifications and to submit consolidated lists, insofar as this is necessary for the Federal Institute to perform its tasks, in particular to obtain uniform documents for assessing the transactions carried out by capital management companies. The statutory instrument may also contain more detailed provisions on the maintenance of a public register by the Federal Institute, and on access to this public register, and on the allocation of responsibility for the accuracy and currency of the public register. The Federal Ministry of Finance may transfer this authorisation, by statutory instrument, to the Federal Institute.